In the case of Bankers Trust Company v. City of Raton and Raton Water Works Company, the Supreme Court was asked to determine whether a city could be compelled to pay for waterworks improvements that had been contracted by a private company before being purchased by the city. The City of Raton in New Mexico had bought its local water works from a private company which previously agreed with Bankers Trust Co., an investment firm, to make certain improvements. After purchasing the system, however, the city refused to honor this agreement arguing it wasn't bound by contracts made prior to their ownership. The Supreme Court ruled against Bankers Trust Co., stating that while cities can enter into contracts as any other corporation might do so under state law; they cannot be forced into obligations not expressly stated or necessarily implied in statutes authorizing them. Therefore, since there was no explicit statutory obligation for cities in New Mexico at that time requiring them to assume such debts upon acquiring utilities like water systems - even if those debts were incurred for public benefit -  the court held that Raton did not have responsibility towards these improvement costs.

In the dissenting opinion for Bankers Trust Company v. City of Raton and Raton Water Works Company, Justice McReynolds disagreed with the majority's decision to uphold a lower court ruling that allowed the city of Raton to default on its bond obligations without penalty. He argued that this decision violated basic principles of contract law and unfairly penalized investors who had purchased these bonds in good faith. Furthermore, he contended that allowing municipalities to escape their financial obligations would undermine investor confidence and could potentially destabilize financial markets. In his view, it was not within the purview of courts to absolve debtors from their contractual commitments simply because they found them inconvenient or burdensome.