The U.S. Supreme Court case Stellwagen v. Clum (1917) revolved around a dispute over the bankruptcy of the Georgian Bay Company and its assets. The company had previously sold timberland to Zengerle, who then mortgaged it back to them as security for payment installments on the purchase price. When Georgian Bay went bankrupt, their trustee, Clum, claimed that this transaction was fraudulent and voidable under section 67e of the Bankruptcy Act because it occurred within four months prior to filing for bankruptcy and left no other assets available for creditors. However, Stellwagen (trustee for Zengerle) argued that since they were not aware of any fraud or insolvency at time of mortgage creation, they should be considered a bona fide purchaser protected by law from such claims. The Supreme Court sided with Stellwagen stating that while Section 67e does allow trustees in bankruptcy to avoid certain transfers made within four months before filing if debtor is insolvent at time and transfer leaves him without enough property to pay his debts; however this provision doesn't apply when transferee is a bona fide holder of mortgage given in good faith upon an actual consideration before proceedings began.

In the dissenting opinion for Stellwagen v. Clum, it was argued that the majority's decision to allow a trustee in bankruptcy to recover payments made by an insolvent debtor prior to declaring bankruptcy undermined the purpose of insolvency laws. The dissent contended that these laws were designed not only to distribute assets among creditors but also to provide relief for debtors who are unable to meet their financial obligations. By allowing recovery of such payments, they believed this would discourage debtors from attempting honest settlements with their creditors out of fear that these transactions could later be undone if they eventually had no choice but declare bankruptcy. They felt this approach was counterproductive and contrary to public policy which should encourage fair dealings between parties rather than fostering uncertainty and mistrust.