In the 1914 case of Detroit Trust Company, Trustee in Bankruptcy of Coates v. Pontiac Savings Bank, the United States Supreme Court addressed a dispute over bankruptcy proceedings and property rights. The bankrupt party had given a mortgage on his real estate to secure his note at Pontiac Savings Bank before declaring bankruptcy. Afterward, he transferred all his property to Detroit Trust Company as part of the bankruptcy process. However, when Pontiac Savings Bank attempted to foreclose on its mortgage after learning about the transfer, it was met with opposition from Detroit Trust Company who claimed that they held superior title due to their role as trustee in bankruptcy. The Supreme Court ruled in favor of Pontiac Savings Bank stating that under federal law governing bankruptcies at that time (the Nelson Act), no conveyance by an insolvent debtor could defeat a previously recorded lien or mortgage upon real estate; thus upholding the bank's right to proceed with foreclosure despite subsequent transfers made during insolvency proceedings.

In the dissenting opinion for Detroit Trust Company v. Pontiac Savings Bank, it was argued that the majority's decision failed to adequately consider Michigan state law and precedent regarding bankruptcy proceedings. The dissent contended that under these laws, a trustee in bankruptcy should not be able to recover payments made by an insolvent debtor prior to declaring bankruptcy if those payments were made in good faith and without knowledge of insolvency. In this case, Coates had paid off his debt with Pontiac Savings Bank before filing for bankruptcy; therefore, according to the dissenters' interpretation of state law, Detroit Trust Company (as trustee) should not have been allowed to reclaim those funds from Pontiac Savings Bank on behalf of other creditors. They believed that allowing such reclamation would unfairly penalize innocent parties who received payment without any indication or suspicion of impending insolvency.