Debt priority through attachment is not something familiar to English law, however in America the facts are quite different, and in this instance the indebtedness of a lender became primary to the borrower’s failure to repay, after a third party attached the sum outstanding through applicable State law.
In 1896, two men residing in North Carolina entered into a verbal agreement concerning the lending of $180; during which time, the lender and now claimant had an outstanding debt of $344 with a lender in Maryland.
While visiting Baltimore, the now defendant was approached by the Maryland lender, who issued a writ of attachment for $180 under the powers of §§ 8 and 10 of art. IX of the Code of Public General Laws of Maryland, both of which read:
“8. Upon making the affidavit and producing the proofs before the clerk of the court from which such attachment is to issue…he shall issue an attachment against the lands, tenements, goods, chattels and credits of said debtor.
10. Any kind of property or credits belonging to the defendant, in the plaintiff’s own hands, or in the hands of any one else, may be attached; and credits may be attached which shall not then be due.”
Having failed to attend the hearing, the defendant admitted later acquiesced to the attachment and entered payment for the sum owed to the Maryland claimant in accordance with both the statute and decision of the court.
Upon this, the claimant sought remedy on grounds that the Maryland court lacked sufficient jurisdiction to apply such an attachment, whereupon the defendant claimed under art.IV of the U.S. Constitution that:
“Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.”
Therefore, the judgment against the defendant to the claimant’s creditor was equally valid in North Carolina as it was in Maryland.
However, the Supreme Court of North Carolina awarded in favour of the claimant on grounds that the defendant was in Maryland for but a brief time, and that the debt was initiated and so grounded in North Carolina.
Heard before the U.S. Supreme Court, it was explained through Chicago, R. I. & P. Co. v. Sturm that:
“All debts are payable everywhere unless there be some special limitation or provision in respect to the payment; the rule being that debts, as such, have no locus or situs, but accompany the creditor everywhere, and authorize a demand upon the debtor everywhere.”Chicago, R.I. & P. Co. v. Sturm
While § 35 of art. IX of the Code of Public General Laws of Maryland provides that:
“Any judgment of condemnation against a garnishee ad execution thereon, or payment by such garnishee, shall be sufficient and pleadable in bar in any action brought against him by the defendant in the attachment for or concerning the property or credits so condemned…”
Which translated that the claimant had equal opportunity to sue the defendant for his debt while in Maryland, but failed to do so, while it was also held that upon litigation, the defendant was under a legal duty to notify the claimant that a third party had issued an attachment for the $180, whereupon the claimant is afforded opportunity to defend the debt, as had been held in Morgan v. Neville.
This caveat left the Court with no option other than to reverse the previous decision for further discussion, so as to avoid duplication of a debt recently paid in full, while further holding that:
“Power over the person of the garnishee confers jurisdiction on the courts of the State where the writ issues…”