In the 1931 case Daniel, Trustee in Bankruptcy v. Guaranty Trust Co. of New York, the Supreme Court ruled on a dispute over whether certain payments made by an insolvent debtor were voidable as preferences under Section 60b of the Bankruptcy Act. The debtor had issued debentures secured by collateral trust notes and later defaulted on these obligations leading to bankruptcy proceedings. Prior to defaulting, however, they paid interest due on some debentures held by Guaranty Trust Company (GTC). After being declared bankrupt, Daniel was appointed trustee and sought to recover these payments from GTC arguing that they constituted preferential transfers which unfairly favored one creditor over others. The court disagreed with this argument stating that such payments did not constitute a preference because at the time they were made there was no evidence suggesting insolvency or impending bankruptcy for the debtor company; hence it could not be said that GTC received more than it would have in liquidation proceedings if those had been initiated when payment was made.

In the dissenting opinion for Daniel, Trustee in Bankruptcy v. Guaranty Trust Co. of New York, Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of equity jurisprudence. He contended that a trustee in bankruptcy should be able to recover payments made by an insolvent debtor within four months prior to filing for bankruptcy if those payments were intended to prefer one creditor over others. In this case, he believed that such preference had been shown as the payment was made while insolvency proceedings were pending against the debtor company and it resulted in giving priority to one creditor’s claim over others'. Therefore, according to him, these payments should have been set aside and distributed among all creditors equally rather than being allowed to benefit only one.