In the 1907 case of Arkansas Southern Railroad Company v. German National Bank, the U.S. Supreme Court was tasked with determining whether a lower court had erred in its decision regarding a dispute over bonds issued by the railroad company and held by the bank. The railroad company argued that it should not be required to pay interest on these bonds as they were fraudulently issued without proper authorization from their board of directors. However, because this claim was not raised during initial proceedings, it could not be considered for appeal at this stage according to established legal principles. The Supreme Court ruled in favor of German National Bank, upholding that even if there were irregularities or fraud involved in issuing these bonds initially; since they have been sold to an innocent third party (the bank), who bought them under good faith without knowledge of any such issues - then those potential problems do not affect validity or enforceability against said holder/purchaser. This ruling reinforced two important aspects: firstly, procedural rules about raising defenses timely and secondly, protection rights for bona fide purchasers under commercial law.

In the dissenting opinion for Arkansas Southern Railroad Company v. German National Bank, Justice Harlan argued that the majority's decision was inconsistent with prior rulings and principles of equity. He contended that a mortgagee who acquires property under foreclosure should not be allowed to profit from their own wrongdoing by benefiting from improvements made by an innocent party. In this case, he believed that the railroad company had acted in good faith when it constructed its line on land it thought it owned, only to later discover there was a pre-existing mortgage on the property held by German National Bank. The bank then foreclosed and sought to take possession of both the land and improvements without compensating Arkansas Southern Railroad Company for its investment in improving the property. Harlan maintained this was unjust enrichment at another’s expense which contradicts fundamental principles of fairness and justice.