Attaching Intangible Property

Attaching Intangible Property

Land and goods sit in one place, so a court that seizes them knows where they are. A debt has no body to seize, yet the older view treated it as property all the same. Garnishment, or foreign attachment, was a proceeding quasi in rem: the thing belonging to the absent defendant was seized and applied to his obligation, and the Federal Constitution, on that view, presented no obstacle to the full exercise of the power.¹ That view left open a question that land never raises. Where is a debt? A debt is only a legal relationship between a creditor and a debtor, so the law must assign it a location, its situs, before a court can call it property within the state. The debtor's home, the creditor's home, or somewhere else: the choice decides which states may use a debt as the basis for suing the creditor.²

Harris v. Balk, decided in 1905, gave the answer that pushed attachment furthest. A debt is located wherever the debtor can be personally served, because the obligation is transitory and follows the debtor on all his rounds.³ Epstein, a Maryland resident, held a money claim against Balk of North Carolina and could not sue Balk in Maryland. Harris, also of North Carolina, owed Balk $180. When Harris passed through Maryland, Epstein had the debt attached by serving Harris there, and Harris paid it to the sheriff for the credit of Epstein's claim. When Balk later sued Harris on the debt in North Carolina, the Supreme Court held that the payment under the Maryland attachment was a complete defense.⁴ The result followed from Pennoyer, which allowed a court to proceed on any asset of a nonresident that lay within the state and was attached at the right time. The only open question in Harris was whether the debt lay in Maryland, and the Court said it did because Harris was there.⁵ Picture Harris carrying Balk's $180 in cash across the state line. There the money could be attached like any other piece of Balk's property, whatever Balk's own ties to Maryland.⁶

The unfairness appears once you notice who controlled what. The debtor's travels decided where the debt was, and the creditor controlled none of them. The creditor's amenability to suit traveled with the debtor, so the creditor had to be ready to defend an attachment in any forum where the debtor could be served, however little the creditor had to do with that forum and however unrelated the debt was to the plaintiff's claim.⁷ A person with a savings account in a distant state could be forced to defend any cause of action there, and a supplier who sold on credit could be sued in the home state of every customer.⁸

The contractor in the example faces the bind the situs rule created for any defendant with no other tie to the forum: default and lose the property, or appear to defend and take on personal liability.⁹ Some courts recognized the problem and allowed a limited appearance. It let the defendant litigate the merits of the plaintiff's claim without submitting to the court's personal jurisdiction, so the property held hostage could be defended without risking a personal judgment.¹⁰ A contractor with that option could contest the supplier's claim and lose at most the $30,000. The remedy was only partial. It lowered the cost of defending but left the root defect in place, because the debt's location in Oregon still came from the homeowner's vacation, and the forum still had no connection to the contractor, the claim, or the debt.

Harris itself carried one limit. The attaching plaintiff was said to represent the creditor of the garnishee, the person who owed the debt, so the debt could be reached only in a state where the principal defendant, Balk, could have sued the garnishee, Harris, had personal jurisdiction over Harris been obtained there.¹¹ Epstein, who caught Harris in such a state, had something to attach, while a plaintiff who caught a debtor elsewhere did not. Shaffer later identified the weak point in that reasoning. Unless the plaintiff already holds a judgment establishing the claim against the principal defendant, the plaintiff's right to “represent” that defendant in an action against the garnishee is itself in dispute.¹²

Before International Shoe, this kind of attachment did real work. Personal jurisdiction was so restrictive that a defendant who had injured the plaintiff in the forum could not be sued there, and attachment let the plaintiff reach the defendant's property instead. When International Shoe widened personal jurisdiction, long-arm statutes reduced the need for attachment, yet the Supreme Court waited more than thirty years to address the imbalance.¹³ In Shaffer the Court declined to re-examine the facts of cases decided on the rationales of Pennoyer and Harris to see whether they might survive, and it declared that prior decisions inconsistent with the minimum contacts standard are overruled.¹⁴ Three years later, World-Wide Volkswagen Corp. v. Woodson described Shaffer as having abandoned the outworn rule of Harris v. Balk, under which a creditor's interest in a debt could be affected by any state with transitory jurisdiction over the debtor. The Court then refused to adopt an analogous rule under which a seller's amenability to suit would travel with a chattel.¹⁵

The contacts inquiry replaced the situs rule, and it asks about the defendant, who in a debt case is the creditor. The debtor's presence in the forum is a fact about the debtor, and a passing trip supplies none of the ties the standard looks for. A thread must hold the claim, the defendant, and the state together.¹⁶ In the hypothetical, the Oregon attachment now fails unless the contractor has minimum contacts with Oregon. A rule that places property by convention instead of real connection also lets the plaintiff choose the forum, which can turn a state into a magnet for suits. The Court confronted that problem when the thing seized was stock in a Delaware corporation, as the next sections show.¹⁷