In the 1928 case of Exchange Trust Company v. Drainage District No. 7, Poinsett County, Arkansas et al., the U.S Supreme Court ruled in favor of the plaintiff, Exchange Trust Company. The company had purchased bonds issued by a drainage district in Arkansas and later sued when it did not receive payment on those bonds due to an insufficiency of funds from tax collections within that district. The court held that under state law, these districts were obligated to levy sufficient taxes for bond repayment and could be compelled to do so through mandamus proceedings (a judicial remedy which is essentially an order from a court to an inferior government official ordering them to properly fulfill their official duties or correct an abuse of discretion). Therefore, despite arguments made by defendants about potential hardship caused by such levies on local landowners who would bear this burden indirectly via increased property taxes; they still had legal responsibility for ensuring adequate funding was available for repaying debts incurred as part of public works projects like drainage improvements.

In the dissenting opinion for Exchange Trust Company v. Drainage District No. 7, Poinsett County, Arkansas et al., Justice Stone argued that the majority's decision was inconsistent with previous rulings of the Court and violated principles of federalism by interfering in state affairs. He contended that it was not within the jurisdiction of a federal court to interfere with or control an administrative body created under state law unless there is a clear violation of constitutional rights or federal laws involved. In this case, he believed no such violation existed and therefore disagreed with the majority's ruling which allowed for interference in local drainage district matters based on contractual obligations between parties. The justice emphasized respect for states' rights and autonomy as crucial elements in maintaining balance within our system of government.