In the case of Ivanhoe Building & Loan Association v. Orr, Trustee in Bankruptcy (1934), the U.S Supreme Court was tasked with determining whether a bankruptcy trustee could avoid a mortgage that had been recorded late. The Ivanhoe Building and Loan Association had given a loan to two individuals who then used it to purchase real estate property. However, they failed to record this transaction immediately as required by California law at that time. When these borrowers later filed for bankruptcy, their trustee sought to have the mortgage declared void due its late recording - arguing that under federal law he stood in the position of an ideal lien creditor who could invalidate unperfected liens on debtor's property. The Supreme Court ruled against him stating that while indeed federal law determines when and how a trustee can avoid transfers or obligations incurred by bankrupts prior their filing for bankruptcy; state laws determine what constitutes such transfer or obligation i.e., whether there is any interest/lien existing which may be avoided by said trustee. Therefore since according to California law at that time, even though delayed - once recorded properly; mortgages were considered valid from date of execution against subsequent purchasers or encumbrancers including trustees in bankruptcy – thus no avoidance was possible here.

The dissenting opinion in the case of Ivanhoe Building & Loan Assn. v. Orr, Trustee in Bankruptcy argued that the majority's decision to allow a bankrupt debtor to reclaim property transferred prior to bankruptcy was incorrect and contrary to established legal principles. The dissent contended that such transfers should be considered valid unless they were made with fraudulent intent or without fair consideration, neither of which had been proven in this case. It also disagreed with the majority's interpretation of relevant statutes, arguing that these laws were intended not only to protect creditors but also debtors who acted honestly and fairly. Therefore, it concluded that allowing honest debtors like Ivanhoe Building & Loan Association to lose their property due simply because they later filed for bankruptcy would undermine these statutory protections and create an unjust result.