The American Judiciary, page 179 by Simeon E. Baldwin
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very inadequate. The discharge of the debtor is of no avail except as against those creditors who were subject to the jurisdiction of the court. None are so subject except those belonging in the State, or actually taking part in the proceedings.
Every bankruptcy or insolvency proceeding is a great lawsuit. The discharge is the final judgment in it. It can bind none who are not parties to the action. Only those are parties who were bound to appear, or who did appear. No one belonging to any other State or country can be bound to appear, unless in the rare case of a personal service of proper process upon him, made while he was within the territorial jurisdiction. Any creditor, wherever he may reside, who files a claim against the insolvent estate, or receives a dividend from it, makes himself a voluntary party. But as against a non-resident who keeps aloof and takes no part in the proceedings the discharge is worthless, even in the courts of the very State by authority of which it was granted.
On the other hand, the creditor gets less aid from the State courts than a trustee in bankruptcy. The trustee in bankruptcy can sue in any court in the country in which the debtor could have sued for the same cause of action. The trustee or assignee in insolvency, acting under the appointment of a State court, can only sue within that State, unless his title has been fortified by a conveyance from the insolvent which would be good at common law. So far as his title rests on a law, by which it was taken away from the bankrupt and vested in him, it is ineffectual wherever that law is ineffectual; and the law of no sovereign is effectual of its own force outside of his territorial jurisdiction.
*[Footnote: Booth v. Clark, 17 Howard's Reports, 322, 337; Hale v. Allinson, 188 U. S. Reports, 56.]*
If, therefore, as is commonly true in estates of any magnitude, part of the assets can only be recovered by suit in other States, there must be ancillary insolvency proceedings there, to clot