In the case of Zartman, Trustee in Bankruptcy, v. First National Bank of Waterloo (1909), the U.S Supreme Court was tasked with determining whether a bank could claim priority over other creditors for funds deposited by an insolvent debtor shortly before declaring bankruptcy. The debtor had borrowed money from the First National Bank of Waterloo and subsequently deposited those funds into another account at the same bank. When he declared bankruptcy soon after, his trustee in bankruptcy sought to distribute these funds among all his creditors equally. However, the bank argued that it should be given priority as it held both accounts involved in this transaction. The court ruled against the bank's claim for preferential treatment on two grounds: firstly because there were no clear indications that when depositing these borrowed funds back into their own institution they intended to give themselves preference over other creditors; secondly because under federal law at that time banks did not have special status allowing them to recover deposits made by insolvent debtors ahead of other creditors.

In the dissenting opinion for Zartman v. First National Bank of Waterloo, it was argued that the majority's decision failed to properly apply existing bankruptcy laws and precedent. The dissent took issue with the court's interpretation of "preferences" in bankruptcy law, arguing that a debtor should not be allowed to favor one creditor over another by transferring assets shortly before declaring bankruptcy. They contended that such actions undermine the equitable distribution of assets among all creditors - a fundamental principle in bankruptcy proceedings. Furthermore, they disagreed with the majority’s view on what constitutes an “insolvent” person under these circumstances; asserting that insolvency should be determined based on inability to pay debts when due rather than simply having liabilities exceed assets at any given time. This disagreement extended also to whether or not certain transfers were made while insolvent and if they could therefore be deemed voidable preferences.