In the 1920 case of Sutton, Trustee of Estate of Hillsboro Dredging Company, Bankrupt v. United States, the Supreme Court was tasked with determining whether a claim by the U.S. government for unpaid taxes had priority over other creditors in bankruptcy proceedings. The Hillsboro Dredging Company had gone bankrupt and owed significant back taxes to the federal government. Other creditors argued that their claims should be paid before those of Uncle Sam's because they were secured by liens on company property while tax debts were not specifically tied to any assets. The court ruled in favor of the United States, establishing an important precedent: In bankruptcy cases where there are insufficient funds to pay all debts fully, claims by the federal government for unpaid taxes take precedence over other unsecured claims regardless if they're backed up by liens or not. This decision reinforced one aspect of sovereign immunity - that as a general rule unless Congress has said otherwise explicitly or implicitly through legislation; when it comes to collecting its own debts (like income tax), Uncle Sam gets first dibs.

The dissenting opinion in the case of Sutton, Trustee of Estate of Hillsboro Dredging Company, Bankrupt v. United States argued that the majority's decision was incorrect because it failed to properly interpret and apply bankruptcy law. The dissent believed that a claim against a bankrupt estate should not be allowed if it is based on an unliquidated damage claim for breach of contract unless there has been an actual loss suffered by the claimant before bankruptcy proceedings begin. In this case, they argued that no such loss had occurred prior to the start of bankruptcy proceedings as required by law. Therefore, according to their interpretation, allowing such claims would unfairly burden other creditors who have legitimate liquidated claims against the bankrupt estate and could potentially lead to unjust enrichment for certain creditors at others' expense.