In the case of Callaway, Trustee, et al. v. Benton et al., 1948, the United States Supreme Court was asked to determine whether a bankruptcy court had jurisdiction over an insurance policy that was part of a bankrupt estate but held by third parties as collateral for loans made to the debtor prior to his bankruptcy filing. The trustee in bankruptcy sought possession of this policy and its proceeds from those holding it as security for their loans. The lower courts ruled in favor of these creditors, stating that they were entitled to retain possession under state law which allowed them such right when acting in good faith and without notice of any adverse claim at the time they took control over it. The Supreme Court reversed this decision on appeal, ruling instead that federal law governed matters relating to bankrupt estates and therefore superseded conflicting state laws on such issues. It held that since Congress intended all property belonging or owed by a debtor at commencement of proceedings be included within his estate subject to administration by trustee (unless expressly exempted), then this life insurance policy should also fall into same category despite being possessed by others who claimed rights against it based upon pre-bankruptcy transactions with debtor.

In the dissenting opinion for Callaway, Trustee, et al. v. Benton et al., it was argued that the majority's decision to allow a creditor to recover payments made by an insolvent debtor within four months of bankruptcy filing contradicted previous rulings and interpretations of Section 60b of the Bankruptcy Act. The dissenting justices believed this ruling would unfairly penalize creditors who had no knowledge or reason to suspect their debtor's impending insolvency or bankruptcy filing at the time they received payment. They also expressed concern that such a precedent could discourage future business transactions due to fear of potential clawbacks in case of unexpected bankruptcies. Furthermore, they disagreed with the majority’s interpretation that “reasonable cause” should be determined solely from circumstances surrounding transaction rather than considering subjective factors like actual knowledge or intent on part of creditor.