Recent Home Game Arguement

<font color="black"> </font> This is my first post, I hope I didn't screw anything up too badly. I was recently at a home game. It was a very small game, five of us, each putting in $5 for a winner-take-all mini-tournament. It was down to me and one other player near the end of the match. I had about $10 in chips and he had about $15. The blinds were very high ($2/$4) as we had been playing one-on-one for quite some time. I took a cripling blow to my chipstack after a big hand, and I was down to my last $3. The next hand, I was BB for $4. The guy I was playing against told me that I could not play the next hand as I could not pay my blinds. I thought this to be incorrect, as I should be able to put my last $3 out there as my blind. 2 of the 3 bystnaders sided with me, so I got to play my hand. Eventually I ended up with all of the chips, winning the match and making the opposing player very angry, as he thought I should have lost when I couldn't pay my blinds.

Who's right here?