The U.S. Supreme Court case Converse, Receiver v. Hamilton in 1911 revolved around a dispute over the payment of dividends from stocks owned by an insolvent bank. The defendant, Hamilton, was a shareholder of the First National Bank of Sioux City which had gone into receivership under Converse's management due to insolvency. Prior to this event, Hamilton received dividends from his shares in another company (Cudahy Packing Company) that were held as collateral by the insolvent bank for loans he owed them. The receiver argued these dividends should have been used to offset his debt with the failed bank and sued him for their value. Hamilton contended that since he wasn't notified about using those dividends towards his debt before they were paid out, he shouldn't be liable for them now after-the-fact; essentially arguing ignorance on how such matters are handled legally when banks become insolvent. However, the court ruled against him stating it is not necessary for a debtor to receive notice prior to applying any income generated from collateral towards outstanding debts during insolvency proceedings - thus siding with Converse.

In the dissenting opinion for Converse v. Hamilton, Justice Holmes disagreed with the majority's decision to uphold a lower court ruling that allowed a receiver of an insolvent corporation to recover funds from stockholders who had not fully paid for their shares. He argued that under Michigan law, which governed this case, shareholders were only liable up to the amount they agreed to pay for their shares and no more. In his view, if a shareholder agreed to pay $100 per share but only paid $50 when he received it and then later sold it at its market value of $75 or even less than what was originally owed on it ($50), he should not be held liable for any additional amounts after selling his interest in the company because he did not receive anything beyond what was due him based on his original agreement with the company. The fact that other creditors might suffer as a result is irrelevant since they knew or should have known about these limitations when extending credit.