In the 1932 case of Buffum, Trustee in Bankruptcy v. Peter Barceloux Co., the United States Supreme Court ruled on a matter concerning bankruptcy law and property rights. The trustee in bankruptcy, Buffum, sought to recover payments made by an insolvent debtor (the bankrupt party) to Peter Barceloux Company within four months prior to filing for bankruptcy. These payments were claimed as preferential transfers under Section 60b of the Bankruptcy Act since they allowed one creditor (Peter Barceloux Co.) to receive more than it would have received from the estate if distributed equally among all creditors. However, Peter Barceloux Co argued that these payments were secured by a mechanic's lien which gave them priority over other claims against the property involved. The Supreme Court held that even though state law recognized such liens as valid encumbrances against real estate, federal bankruptcy law did not automatically recognize their validity when determining whether certain transfers are preferential or not. Therefore, despite having a mechanic's lien under California state law where this case originated from; it was still considered a preference under federal bankruptcy laws because it enabled Peter Barceloux Company to obtain more than its fair share compared with other unsecured creditors.

In the dissenting opinion for Buffum, Trustee in Bankruptcy v. Peter Barceloux Co., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of equity. He contended that a creditor who had received preferential payments from an insolvent debtor should not be allowed to keep those payments if they were made within four months of bankruptcy proceedings being initiated. This is because such transactions are often fraudulent or unfair to other creditors. The majority ruled otherwise, stating that such transfers could only be set aside if they were made with actual intent to defraud other creditors or if there was evidence of collusion between the debtor and creditor involved in the transfer. However, Justice Stone believed this interpretation ignored established legal principles designed to ensure fair treatment for all parties involved in bankruptcy cases.