In the Bellingham Bay Improvement Company v. New Whatcom case of 1898, the U.S Supreme Court was tasked with determining whether a city could be held liable for damages caused by changes in street levels. The Bellingham Bay Improvement Company had built several buildings on land it owned in the city of New Whatcom, Washington. However, when the city changed its street grades and levels to improve drainage and sewage systems, these alterations resulted in significant damage to those properties. The company sued for compensation but lost at both trial court level and state supreme court level as they ruled that municipalities were not responsible for such incidental damages resulting from public improvements made under lawful authority. Upon appeal to the U.S Supreme Court, it upheld these rulings stating that while private property cannot be taken without just compensation under eminent domain laws; this principle does not apply where consequential or incidental damages result from a municipality's exercise of its police power - which includes making necessary public improvements like altering street grades.

In the dissenting opinion for Bellingham Bay Improvement Company v. New Whatcom, Justice Brewer argued that the city of New Whatcom had no legal right to tax property owned by Bellingham Bay Improvement Company because it was not within its jurisdiction. He contended that a municipality cannot impose taxes on properties located outside its boundaries and therefore, any such taxation is invalid and unconstitutional. Furthermore, he disagreed with the majority's interpretation of Washington state law regarding municipal taxing powers, asserting that they misinterpreted it to allow cities like New Whatcom to levy taxes beyond their territorial limits. In his view, this decision would set a dangerous precedent allowing municipalities unchecked power over non-residents' properties which could lead to potential abuses in future cases.