The U.S. Supreme Court case Bank of Marin v. England, Trustee in Bankruptcy (1966) revolved around the issue of whether a California bank could claim priority over other creditors for funds it had advanced to a bankrupt company under an agreement that was not properly perfected according to state law. The court ruled against the bank, holding that federal bankruptcy law did not permit such priority claims unless they were valid and enforceable under applicable state laws at the time of bankruptcy filing. Therefore, since the bank's security interest was unperfected under California law when bankruptcy proceedings began, it could not assert its claim as a secured creditor with priority over others in those proceedings.

In the dissenting opinion for Bank of Marin v. England, Justice Douglas argued that the majority's decision was a departure from established principles governing bankruptcy proceedings. He contended that under these principles, a creditor who has received preferential payments from an insolvent debtor must return them so they can be distributed equitably among all creditors. The majority held that this rule did not apply to the bank in this case because it had acted in good faith and without knowledge of the debtor's insolvency when it accepted payment. However, Justice Douglas asserted that there is no "good faith" exception to this rule and criticized the majority for creating one out of thin air. He also pointed out inconsistencies between their ruling and previous decisions by lower courts on similar issues.