In the case of City of Columbus v. Mercantile Trust and Deposit Company of Baltimore (1910), the U.S Supreme Court dealt with a dispute over bonds issued by the city to fund public improvements. The city had issued these bonds under an 1868 statute, which allowed it to levy taxes for their payment. However, in 1902, Ohio passed a new law limiting municipal taxation powers that effectively prevented Columbus from raising sufficient funds through taxation to meet its bond obligations. The Mercantile Trust and Deposit Company sued on behalf of bondholders when payments were missed. The key issue was whether Ohio's 1902 tax limitation law impaired the obligation of contracts between Columbus and its bondholders in violation of Article I Section 10 Clause I (the Contract Clause)of the United States Constitution.The Supreme Court ruled in favor of Mercantile Trust, holding that while states have broad power over municipalities including control over fiscal affairs,the state could not pass laws impairing contractual obligations.This decision reaffirmed earlier rulings protecting contract rights against state interference,and emphasized that cities' financial commitments are protected under constitutional contract clause protections even if they conflict with subsequent state legislation.

In the dissenting opinion for the case City of Columbus v. Mercantile Trust and Deposit Company of Baltimore, Justice Harlan argued that the city had no right to repudiate its obligations under a contract it willingly entered into with private parties. He contended that such an action was not only morally wrong but also unconstitutional as it violated the Contract Clause in Article I, Section 10 of the U.S Constitution which prohibits states from passing laws impairing contractual obligations. Furthermore, he disagreed with majority's interpretation of Ohio state law regarding municipal bonds issuance and believed that Columbus had acted within its rights when issuing these bonds initially. Therefore, according to him, there was no legal basis for invalidating them later on.