In the case of Manhattan Properties, Inc. v. Irving Trust Co., the U.S Supreme Court ruled in favor of Irving Trust Co., who was acting as a bankruptcy trustee for United Cigar Stores Company. The dispute arose when Manhattan Properties claimed that it had a valid lease with United Cigar and therefore should be paid rent from the bankrupt estate before other creditors were paid off. However, Irving Trust argued that no such lease existed because it hadn't been properly executed according to New York law which required leases longer than one year to be signed by both parties and acknowledged or proven in the manner required to entitle a deed to be recorded. The court agreed with Irving Trust's argument stating that since there was no proper execution of lease agreement between United Cigar and Manhattan properties, hence there is no obligation on part of bankrupt estate (United cigar) towards paying any rents due under said non-existent lease agreement prior to settling claims made by other creditors.

The dissenting opinion in the case of Manhattan Properties, Inc. v. Irving Trust Co., Trustee in Bankruptcy argued that the majority's decision was inconsistent with previous rulings and principles of equity. The dissent contended that a lienholder should not be allowed to benefit from an increase in property value due to improvements made by a bankrupt debtor after bankruptcy proceedings have begun, as this would unjustly enrich the lienholder at the expense of other creditors. This view held that any increase in value attributable to such improvements should instead go towards satisfying claims against the bankrupt estate, rather than being awarded solely to one creditor who holds a mortgage or other lien on the property.