In the 1939 case Yonkers v. Downey, Receiver, the Supreme Court of the United States ruled on a dispute involving tax assessments and bankruptcy proceedings. The City of Yonkers in New York had assessed taxes against a corporation that later went bankrupt. A receiver was appointed to handle the assets of this corporation during its bankruptcy process. However, when these taxes were not paid by either party involved - neither by the city nor by Mr.Downey (the receiver), it led to litigation between them over who should be responsible for paying these outstanding debts. The Supreme Court held that under federal law governing bankruptcy cases, an unpaid tax assessment is considered as an unsecured claim against a debtor's estate rather than as a secured debt or lien on property owned by such debtor unless state law provides otherwise; thus making it subject to discharge in bankruptcy proceedings like other unsecured claims. This decision clarified how local tax obligations are treated within federal bankruptcy laws and procedures: they do not have priority status but instead rank equally with other general creditors' claims.

In the dissenting opinion for Yonkers v. Downey, Receiver, Justice Black disagreed with the majority's decision to uphold a lower court ruling that allowed a receiver in bankruptcy to recover rent from the City of Yonkers. He argued that this violated principles of federalism and state sovereignty because it effectively permitted a federal court to dictate how a city should allocate its resources. Justice Black contended that such an action was beyond the scope of judicial power as defined by Article III of the Constitution. Furthermore, he believed it undermined local autonomy by allowing federal courts to interfere in matters traditionally within state jurisdiction like municipal finance and property management.