In the case of Merchants National Bank of New York and Banque Commerciale de Bale v. Sexton, Trustee in Bankruptcy of Kessler & Company, 1912, the Supreme Court ruled on a dispute involving bankruptcy law. The two banks had advanced money to Kessler & Co., which subsequently went bankrupt. The trustee in bankruptcy for Kessler claimed that these advances were preferential transfers because they were made within four months before filing for bankruptcy and therefore should be returned to the estate for distribution among all creditors equally. However, both banks argued that their advances were not preferential as they did not have reasonable cause to believe that Kessler was insolvent at the time when such payments were made. The court sided with the banks stating there was no evidence showing either bank knew or had reason to know about Kessler's insolvency at those times.

In the dissenting opinion for Merchants National Bank of New York and Banque Commerciale de Bale v. Sexton, Trustee in Bankruptcy of Kessler & Company, it was argued that the majority's ruling failed to properly interpret bankruptcy law as it pertains to preferential transfers. The dissent contended that a transfer made by an insolvent debtor within four months prior to filing for bankruptcy should be deemed voidable if it gives one creditor preference over others. In this case, they believed that such a preferential transfer had occurred when Kessler & Company transferred funds overseas just before declaring bankruptcy. They disagreed with the majority's view that these transactions were not fraudulent or preferential because they were part of ordinary business operations and did not result in any net loss for other creditors.