In the case of Baltimore v. Baltimore Trust and Guarantee Company, 1896, the city of Baltimore was sued by a trust company over unpaid bonds that were issued to finance public improvements. The Supreme Court ruled in favor of the trust company, stating that despite changes in government structure or financial difficulties faced by a municipality, it cannot evade its obligations to repay debts incurred for public purposes. The court emphasized that cities are not exempt from fulfilling their contractual obligations just because they are governmental entities; they must honor their commitments like any other debtor would be expected to do so under law. This decision reinforced principles related to municipal debt obligation and accountability towards creditors.

In the dissenting opinion for Baltimore v. Baltimore Trust and Guarantee Company, Justice Harlan argued that the majority's decision was a departure from established principles of municipal law. He contended that when a city is authorized by its charter to issue bonds for public improvements, it has an obligation to pay those bonds in full regardless of any subsequent changes in its financial circumstances or legislative authority. The majority's ruling allowed the City of Baltimore to default on its bond obligations due to changes in state law which reduced its taxing power, but Harlan believed this violated fundamental principles of contract rights and creditor protection. He also disagreed with the majority's interpretation of Maryland state law regarding municipalities' debt obligations.