In the 1936 case of City Bank Farmers Trust Co. v. Irving Trust Co., the United States Supreme Court was tasked with determining whether a trust receipt, given by a bank to a bankrupt company for goods purchased but not yet paid for, constituted an equitable lien or merely created debtor-creditor relations. The court ruled in favor of Irving Trust Company, holding that such transactions did not create an equitable lien and were instead unsecured claims against the bankrupt estate. This decision clarified that under bankruptcy law, secured creditors have priority over unsecured creditors when it comes to repayment from assets within a bankruptcy estate.

The dissenting opinion in the case of City Bank Farmers Trust Co. v. Irving Trust Co., argued that the majority's decision was inconsistent with both precedent and statutory law, specifically Section 60b of the Bankruptcy Act. The dissenters believed that this section should be interpreted to allow a trustee in bankruptcy to recover payments made by an insolvent debtor within four months prior to filing for bankruptcy if those payments were made while insolvent and resulted in preferential treatment for certain creditors over others. They contended that there was no requirement under Section 60b for proving fraudulent intent on part of either party involved, contrary to what majority held. Furthermore, they disagreed with the majority's interpretation regarding "for or on account of" clause present in same section which according them meant any payment reducing existing indebtedness regardless whether it is direct or indirect payment towards such debt.