Louisville & Nashville Railroad v. Nash

BRICKELL, C. J. The appellee, a resident of this State, and an employe of appellant, brought this action against appellant, the Louisville & Nashville Railroad Co., a corporation organized under the laws of the State of Kentucky, and doing business in that State and also in Alabama and Tennessee, to recover the amount of wages earned and due him for work and labor done here •for appellant. In defense of the action appellant set up the payment by it, previously to the commencement of this suit, of a judgment rendered against it in a justice’s court in the State of Tennessee in an attachment suit, founded on a debt due in Tennessee, wherein appellee was defendant, and appellant was summoned to answer as garnishee. Appellee was a resident of Alabama at the time of the commencement, and during the pendency, of said attachment suit, was not personally served with notice thereof, had no actual notice, and did not voluntarily appear, but service was had on him — 482 — by publication in accordance with the laws of Tennessee. The questions presented by this appeal are, therefore, first, whether the courts of one State have, or can acquire, jurisdiction to attach and condemn a debt due to a non-resident and payable in the State of his residence, by service of process on his debtor as garnishee, in the absence of personal service within the State of suit on the creditor, or his voluntary appearance; and, second, whether, if such courts are without jurisdiction tor this purpose, the payment by the garnishee of a judgment rendered against him as garnishee under such circumstances will constitute any defense to a subsequent suit by his creditor to recover the debt. The case presented is ruled, with respect to both questions, by the cases of L. & N. R. R. Co. v. Dooley, 78 Ala. 524, and A. G. S. R. R. Co. v. Chumley, 92 Ala. 317. In film former case it was held that a debt due by a foreign corporation to an employe in the State of its creation, although it was doing business in this State also, could not be subjected by a creditor in this State by attachment against the non-resident creditor and garnishment against the corporation. In the latter, we decided that the payment by a railroad corporation created by the laws of this State, but doing business also in Tennessee, of a judgment rendered against it in Tennessee under a garnishment issued on a judgment recovered in that State against an employe resident in this State, was no' defense to an action by the employe to recover the wages due hiin for work done in this State, in the absence of evidence showing that, by the statutes of Tennessee, the court had acquired jurisdiction of the debt sought to be reached and subjected. In both of the above cases, it -was expressly decided, that the situs of a debt for the purpose of garnishment is at the domicil of the creditor, and not that of the debtor. And this fact is the true foundation for the proposition, that a State has no jurisdiction over a debt due to a non-resident and payable without the State of suit, in the absence of personal service on the creditor -within the State, or his volum tary appearance in a proceeding, in which jurisdiction over it is sought to be exercised. If it be conceded that a debt due by a resident of, or a corporation doing business in, one State to a resident in another State, is not — 483 — property within the State of the debtor’s residence, no legislation by the latter State can give it a situs there for the purpose of enabling its citizens, or other persons resorting to its courts, to subject it to the payment of claims against the creditor by garnishing the person or corporation from whom it is due. If it has no situs within the debtor’s State, in the absence of legislation, any legislation attempting to give it such situs, or to prescribe the manner of service on either the debtor or the non-resident creditor, by which jurisdiction over it may be acquired, unless by personal service on the creditor within the State, or his voluntary appearance, would be as nugatory and ineffectual-to dispose of the creditor’s property in the debt, as wrould be legislation attempting to acquire jurisdiction over tangible property situated without the State. The subject matter of such legislation, namely, the property over wiiich it is attempted to acquire jurisdiction, is entirely beyond the powrer and control of the State. In the view we take of the question, the condemnation of a debt due to a non-resident, without personal service within the State of suit on the defendant, or owmer of the debt, or his voluntary appearance, is without due process of law7, and it seems manifest that a State cannot make that due process of law7 which is not such. — Martic v. Central Vermont R. Co., 50 Hun. 347, 3 N. Y. Supp. 82. It is immaterial also, under this concession, whether the corporation garnishee, if the garnishee be a corporation, is one created by the laws of the State where the debt is sought to be condemned, or is a foreign corporación doing business therein by permission of the State. The question is not one of jurisdiction over the garnishee, but one of jurisdiction over property situated without the State, and, through the seizure of such property, over the owmer thereof. The right of a State to inquire into the obligations of a non-resident, and its jurisdiction to attach his property to answer for such obligations, is founded solely on the fact that each State has exclusive control and jurisdiction over the property situated within its territorial limits, and the inquiry can be carried only to the extent necessary to control the disposition of such property. If there be no personal service on the defendant — 484 — or owner of the property, or appearance by him, the jurisdiction cannot extend beyond binding the property attached or effects garnished. Consequently, if the non-resident has no property within the State, and there has been no personal service on him within the State, or voluntary appearance by him, there is nothing upon which its tribunals can adjudicate; and any judgment rendered under such circumstances whether affecting the person only, or the property also, would be void for want of jurisdiction of the person and of the subject matter. — Exchange Nat. Bank v. Clement, 109 Ala. 280; Pennoyer v. Neff, 95 U. S. 714; St. Clair v. Cox, 106 U. S. 350; Freeman v. Alderson, 119 U. S. 185. It was held in Pennoyer v. Neff, supra,- that in a suit on a money demand against a non-resident, substituted service of process by publication is effectual only where, in connection with process against the person for the commencement of the action, property within the State is brought under the control of the court, and subjected to its deposition by process adapted to that purpose, or where the judgment is sought as a means of reaching said property, or affecting some interest therein and that a judgment by default against a non-resident upon such service only, no property of the defendant within the State having been seized prior to the rendition of the judgment, was without due process of law and void; and the title of defendant to property within the State sold under execution issued on such judgment was not divested by such sale, notwithstanding the statutes of the State of suit, authorized service in this manner upon a non-resident, and attempted to protect the title of a purchaser in good faith of property sold under execution issued on such judgment. In the opinion by Mr. Justice Field it is said: “No State can exercise direct jurisdiction and authority over persons or property without its territory. The several States are of equal dignity and authority, and the independence of one implies the exclusion of power from all others. And so it has been laid down by jurists as an elementary principle, that the laws of one State have no operation outside of its territory, except so far as is allowed by comity; and that no tribunal established by it can extend its process beyond that territory so as to subject either per — 485 — sons or property to its decisions. ‘And any exertion of authority of this sort beyond this limit/ says Story, ‘is a mere nullity and incapable of binding such persons or property in any other tribunals.’ ” This decision, involving as it did a construction of the fourteenth amendment of the Federal Constitution, and its effects on judgments rendered against non-residents Avithout personal service or voluntary appearance, and Avithout a preliminary seizure of property of the defendant within the State of suit, is binding upon, and must be followed by, the courts of the several States. It necessarily results from the principles declared therein that if the st lits of a debt for the purpose of garnishment be at the domicil of the creditor, and the debt be not property within the garnishee State, any judgment rendered against the creditor, as Avell as any judgment the effect of AAdiich is, on its face, to discharge the debt due to the non-resident by requiring the debtor, the garnishee, to pay it to the non-resident’s creditor, is Avithout due process of laAV and Amid, unless there Avas personal service on the defendant Avithin the State, or a voluntary appearance by him. It necessarily follows, also, that the payment of such judgment by the garnishee is no protection to him in a subsequent suit by his creditor to recoA-er the debt, and that any legislation by the garnishee State attempting to acquire jurisdiction over the debt, by declaring it to be property within its limits, subject to seizure by service of process on the garnishee and service by publication on the non-resident defendant, “is a mere nullity, and incapable of binding such persons or property in any other tribunals.” Any attempt to reconcile the conflicting authorities on the question of the situs of a debt for the purpose of garnishment, would be vain, but analogy, as Avell as reason and justice to the creditor, vvould seem to fix it at the domicil of the creditor, and forbid its seizure, or any change in the ownership thereof, by the law or procedure of any other State. It is now well settled that a debt due by an insolvent to a non-resident is property Avithin the creditor’s State, .and that no law or decree of the debtor’s State discharging his debts can operate to discharge the debt due to the non-resident. — Brown v. Smart, 145 U. S. 454; Denny v. Bennett, 128 U. S. — 486 — 489; Pattee v. Paige, 163 Mass. 352; Phoenix Nat. Bank v. Batcheller, 151 Mass. 589; Wilson v. Matthews, 32 Ala. 345. It is equally well settled that for the purpose of taxation, a debt has its situs at the domicil of the creditor. — State Tax on Foreign-held Bonds, 15 Wall (U. S.) 300; Kirtland v. Hotchkiss, 100 U. S. 491; In re Bronson, 150 N. Y. 1; State v. Ross, 23 N. J. L. 517; Boyd v. Selma, 96 Ala. 150. In the opinion of the State Tax Case, it was said: “But debts owing by a corporation, like debts owing bjr individuals, are not property of the debtors in any sense; they are obligations of the debtors; and only possess value in the hands of the creditors. With them, are property, and in their hands they may be taxed. To call debts property of the debtors, is simply to misuse terms. All t'he property there can be in the nature of things in the debts of corporations belongs to the creditors to whom they are payable, and follows their domicil, whatever they may be. Their debts can have no locality separate from the parties to whom they are due.” We are unable to perceive any sound reason for giving to a debt a different situs for the purpose of garnishment, and none, satisfactory to us, has been offered by those decisions which give it a different situs for this purpose only. If a debt due to a non-resident cannot be discharged by an insolvency law or decree of the debtor’s State, because of a want of jurisdiction over the creditor and the debt, a like reason should forbid its discharge by garnishment proceedings. Those courts which adhere to the contrary view, are not themselves in accord as to the theory upon which they can acquire jurisdiction over such debts. In some it is held that for the purpose of garnishment a State has the power to fix the situs of a debt at the domicil of the debtor, although the creditor be a nonresident — Williams v. Ingersoll, 89 N. Y. 508; Douglass v. Phenix Ins. Co., 138 N. Y. 209; Bragg v. Gaynor, 85 Wis. 468. As we have seen above, the exercise of such power would be a nullity in its effect upon the person of a non-resident or the debt due him. Others hold that the situs of a debt is wherever a suit may be maintained to recover it. — Harvey v. Great North. R. Co. 50 Minn. 406; Wyeth Co. v. Lang, 127 Mo. 242. As a general proposition this, as we have seen, is incorrect, and as — 487 — limited ami applied to garnishments only, it seems to us, merely an arbitrary distinction. Moreover, if - its situs is in the State or the debtor only by reason of the fact that a suit to recover it may there be maintained, a debt due by a foreign corporation doing business in a Slate other than that of its creation to a non-resident of such State, could not be reached by a garnishment sued out in the State, in the absence of a statute expressly authorizing it to be sued therein on a cause of action arising Avithout the State; for it is Avell settled, as a general rule, that no action in pcrsonmi can be maintained against a foreign corporation, unless the contract sued on Avas made or Avas to be performed, or the injury complained of Avas suffered, in the State in which the action is brought. — Central R. R. & B. Co. v. Carr, 76 Ala. 388; St. Clair v. Cox, 106 U. S. 350. And it has been expressly held that a non-resident creditor of a corporation, cannot 'have his property in a debt seized in a State to Avliich the corporation may resort merely for the purpose of doing business through its agents, Avhen the claim arose on a contract not to be performed AAdtliin the State of suit. — Reimers v. Seatco Mfg. Co., 70 Fed. Rep. 573; Douglass v. Phenix Ins. Co., 138 N. Y. 209. We prefer to adhere to the principle upon Avliich our former cases Avere decided, that the situs of a debt is at the domicil of the creditor for t’he purpose of garnishment as Avell as for other purposes. L. & N. R. R. Co. v. Dooley, 78 Ala. 524; A. G. S. R. R. Co. v. Chumley, 92 Ala. 317; Reno on Non-residents, §138 et seq.; Illinois Cent. R. Co. v. Smith, 70 Miss. 344; s. c. 39 L. R. A. 577, and notes; Central Trust Co. v. Chattanooga &c. Co., 68 Fed. Rep. 685; Missouri Pac. R. Co. v. Sharitt, 43 Kan. 375; Renier v. Hurlbut, 81 Wis. 24. Adhering to this respect to the situs of the debt due from appellant to appellee, Ave are constrained by the decisions of the Supreme Court of the United States, cited aboAre, to hold that the judgment of the Tennessee court, operating as it did, on its face, to condemn and diA7est appellee’s property in the debt 0Arer Avhieh it had not acquired jurisdiction by personal sendee Avithin the State on appellee, or by his voluntary appearance, was Avithout due process of law7 and absolutely void for want of jurisdiction of the res, the debt, or of the person of — 488 — its owner. To such judgments the Constitution of the United States does not require that any faith and credit he given; the constitutional provision that “full faith and credit shall be given in each State to the public acts, records and judicial proceedings of every other Slate,” and the act of Congress providing for the mode of authenticating such acts, records and proceedings, being now construed as applicable “only when the court rendering the judgment had jurisdiction of the parties and of the subject matter, and not to preclude an inquiry into the jurisdiction of the court in which the judgment was rendered, or the right of the State itself to exercise authority over the person or the subject matter.” — Pennoyer v. Neff, 95 U. S. 714, supra. We find no error in the judgment of the city court, and it must be affirmed.