In the 1942 case of Corn Exchange National Bank & Trust Co. et al. v. Klauder, Trustee in Bankruptcy, the United States Supreme Court addressed issues related to bankruptcy law and fraudulent conveyance. The bank had received payments from a company that later declared bankruptcy; these payments were made while the company was insolvent and within four months before filing for bankruptcy protection. Under Section 60(b) of the U.S.'s then-Bankruptcy Act, such transfers could be deemed voidable if they gave preferential treatment to certain creditors over others. The trustee in bankruptcy sought to recover these funds on behalf of all creditors but faced opposition from Corn Exchange National Bank & Trust Co., which argued it wasn't aware of insolvency at payment time - an argument rejected by lower courts due to "constructive knowledge" doctrine (i.e., what they should have known). However, upon reaching Supreme Court level, this ruling was reversed with Justice Robert H Jackson delivering majority opinion stating that actual knowledge or reasonable cause must be proven rather than constructive knowledge under Section 60(b), thus favoring Corn Exchange's position.

In the dissenting opinion for Corn Exchange National Bank & Trust Co. v. Klauder, Justice Frank Murphy argued that the majority's decision was a departure from established principles of bankruptcy law and could lead to unjust results. He contended that under traditional rules, when a debtor makes preferential payments to certain creditors shortly before declaring bankruptcy, those payments can be set aside and distributed among all creditors equally. However, in this case, the majority allowed such preferential payments to stand if they were made with funds obtained through loans secured by new liens on property of the debtor. According to Justice Murphy, this ruling would allow debtors and favored creditors to collude at the expense of other creditors by creating new liens just before bankruptcy is declared.