The Supreme Court case National City Bank of New York v. Hotchkiss, as Trustee in Bankruptcy of Haskins (1913) revolved around a dispute over the payment of dividends to a bankrupt company's creditors. The National City Bank had received dividends from the trustee in bankruptcy for debts owed by the bankrupt firm before it was declared insolvent. However, other creditors objected to this on grounds that these payments were preferential and thus violated bankruptcy law which requires equal treatment of all unsecured creditors. They argued that since the bank knew or should have known about the firm's insolvency at time it received those dividends, they should be returned so they could be distributed equally among all creditors. The Supreme Court ruled against them stating there was no evidence proving that when receiving such dividend, either actual knowledge existed or facts were present bringing suspicion to an ordinarily prudent businessperson regarding debtor’s insolvency status.

In the dissenting opinion for National City Bank of New York v. Hotchkiss, Justice Holmes argued that the majority's decision was inconsistent with previous rulings and legal principles regarding bankruptcy law. He contended that a bank should not be held liable for receiving payments from an insolvent debtor in good faith without knowledge of their insolvency. In this case, he believed that the bank had no reason to suspect Haskins' financial instability when it received his payments and therefore should not be required to return them as 'preferences' under bankruptcy law. This interpretation would protect banks and other creditors who unknowingly receive funds from bankrupt debtors, promoting fairness in commercial transactions by ensuring they are not penalized for actions taken without fraudulent intent or insider knowledge.