In the 1895 case of Dougherty v. Nevada Bank, the United States Supreme Court was asked to decide on a matter involving property rights and debt repayment. The plaintiff, Dougherty, had borrowed money from the defendant bank using his land as collateral for a mortgage loan. When he failed to repay his debts in time, the bank foreclosed on his property and sold it at auction to cover their losses. However, they did not inform him about this sale until after it had taken place which violated California law that required lenders to provide borrowers with notice before selling their mortgaged properties at public auctions. Dougherty sued Nevada Bank claiming that because he wasn't given proper notice of foreclosure proceedings or an opportunity to pay off his debt before losing ownership of his land; therefore, these actions were unlawful under state law and should be nullified by federal courts. The Supreme Court ruled against Dougherty stating that while failure by creditors (the bank) to give sufficient notice may have been contrary to California's laws regarding foreclosure procedures; however since there was no evidence showing any intentional fraud or misconduct on part of defendants nor any substantial injury suffered by plaintiff due this procedural error - hence such minor violations do not warrant intervention from federal judiciary system.

The dissenting opinion in Dougherty v. Nevada Bank argued that the majority's decision was inconsistent with established legal principles and precedent. The dissent contended that the bank, as a holder of a promissory note, should be considered an innocent party unless there is clear evidence to suggest otherwise. They disagreed with the majority's interpretation of "bad faith," arguing it should not apply simply because the bank had knowledge of potential defenses against payment at the time they acquired the note. Instead, bad faith should only be inferred if there were circumstances which would lead a reasonable person to believe that fraud or illegality was involved in its issuance or transfer. Furthermore, they believed this case did not present such circumstances and thus concluded that Nevada Bank acted in good faith when accepting Dougherty’s notes for deposit.