In the 1913 case of Taney, Trustee of Miller Pure Rye Distilling Company v. Penn National Bank of Reading, the U.S Supreme Court was tasked with deciding on a matter involving bankruptcy and debt repayment. The Miller Pure Rye Distilling Company had gone bankrupt and its trustee, Taney, sought to recover payments made by the company to Penn National Bank before it declared bankruptcy. These payments were for debts that were more than four months old at the time they were paid off. Under federal law at that time (the Nelson Act), such repayments could be recovered if they favored one creditor over others in a situation where there weren't enough assets to pay all creditors fully. However, Pennsylvania state law allowed these types of repayments as long as they didn't involve fraud or preferential treatment towards certain creditors due to personal relationships or other non-business reasons. The Supreme Court ruled in favor of Penn National Bank stating that while federal laws govern bankruptcy proceedings overall; when it comes to specifics about what constitutes unfair preference among creditors during asset distribution from a bankrupt estate - state laws should prevail unless Congress has explicitly stated otherwise.

In the dissenting opinion for Taney, Trustee of Miller Pure Rye Distilling Company v. Penn National Bank of Reading (1913), Justice Holmes disagreed with the majority's interpretation and application of bankruptcy law. He argued that a trustee in bankruptcy should not be allowed to recover payments made by an insolvent debtor before declaring bankruptcy if those payments were made in good faith and without knowledge or suspicion of insolvency on the part of the recipient. According to him, such recovery would unfairly penalize innocent parties who had no reason to suspect they were dealing with an insolvent debtor. Furthermore, he contended that allowing trustees to recover these payments could discourage businesses from extending credit out of fear they might have to return any payment received if their customer later declared bankruptcy.