In the 1896 case of Fourth Street Bank (of Philadelphia) v. Yardley, the U.S Supreme Court was tasked with determining whether a bank could be held liable for accepting and processing forged checks. The dispute arose when Mr. Yardley's business partner embezzled funds from their shared account by forging Mr. Yardley's signature on several checks which were then cashed at Fourth Street Bank in Philadelphia without his knowledge or consent. The court ruled that while banks have an obligation to know their customers and verify signatures, they are not absolute guarantors against forgery or fraud committed by third parties unless there is negligence involved in handling transactions on its part. In this instance, it was found that the bank had acted within reasonable bounds of care and due diligence as expected under banking practices at that time. Therefore, despite acknowledging Mr.Yardley’s loss due to his partner's fraudulent actions, the court ultimately decided in favor of Fourth Street Bank stating it cannot be held responsible for losses resulting from such criminal acts unless there is clear evidence showing negligence or complicity on its part.

In the dissenting opinion for Fourth Street Bank (of Philadelphia) v. Yardley, it was argued that the majority's decision to rule in favor of Yardley and against Fourth Street Bank was incorrect. The dissenting justices believed that there had been a misunderstanding or misinterpretation of the law regarding promissory notes and their payment upon demand. They contended that when a note is made payable on demand, it becomes due immediately without any grace period unless explicitly stated otherwise in the terms of agreement between parties involved. Therefore, they held that Fourth Street Bank should have been allowed to collect from Yardley as soon as he defaulted on his loan payments rather than having to wait for an unspecified "reasonable" time before taking action as determined by the majority ruling.