In the case of Irving Trust Co., Trustee in Bankruptcy, v. Bowditch et al., 1934, the United States Supreme Court ruled on a dispute involving bankruptcy law and property rights. The Irving Trust Company was appointed as trustee for a bankrupt company and sought to recover payments made by the bankrupt firm to its creditors prior to declaring bankruptcy. These payments were challenged under Section 60b of the Bankruptcy Act which allows trustees to reclaim such transfers if they occurred within four months before filing for bankruptcy and if it can be proven that these transactions favored certain creditors over others. However, one creditor argued that since he had received payment from an escrow account (a third-party holding), not directly from debtor's assets, this did not constitute preferential treatment under Section 60b. The Supreme Court disagreed with this argument stating that funds held in escrow are still considered part of debtor’s estate until paid out; therefore any payment made from it would indeed qualify as preferential transfer if other conditions are met. This ruling clarified how escrow accounts should be treated in cases of bankruptcy.

In the dissenting opinion for Irving Trust Co. v. Bowditch, Justice Cardozo argued that the majority's decision to allow a trustee in bankruptcy to recover payments made by an insolvent debtor prior to declaring bankruptcy was inconsistent with previous rulings and unjust towards creditors who received such payments in good faith. He contended that these transactions should not be considered fraudulent simply because they were made while the debtor was insolvent, especially when there is no evidence of intent to defraud other creditors or prefer one creditor over another. Furthermore, he believed this ruling would discourage future credit extensions as it creates uncertainty and risk for lenders who may later be forced to return funds if their borrower declares bankruptcy within four months of payment.