In the case of Georgetown National Bank v. McFarland et al., 1926, the U.S Supreme Court was tasked with deciding on a dispute involving a bank and its shareholders over dividends. The Georgetown National Bank had declared dividends to be paid out from their surplus fund but later decided not to distribute them due to financial difficulties. Some stockholders sued for payment, arguing that once declared, the dividend became a debt owed by the corporation which could not be revoked or diminished. However, others argued that as long as it remained unpaid and in possession of the company, it was still part of corporate assets subject to business risks and losses. The court ruled in favor of those who believed that an unpaid dividend remains part of corporate assets until actually separated from general funds through payment or some equivalent act. It held that while declaring a dividend creates an expectation among shareholders for receiving profits at specified times; this does not create an absolute right against all contingencies nor make such declaration irrevocable if circumstances change before actual distribution occurs.

In the dissenting opinion for Georgetown National Bank v. McFarland et al., Justice Stone disagreed with the majority's interpretation of Kentucky law regarding a bank's right to set off deposits against debts. He argued that the court should have deferred to state courts' understanding of their own laws, rather than imposing its own interpretation. Furthermore, he contended that even if federal common law were applicable in this case, it would not support the majority’s decision because it traditionally allowed banks to use deposited funds only when they are "free from any claim or lien." In this case, however, there was an existing garnishment on those funds by a third party creditor at the time of deposit. Therefore, according to Justice Stone's view and his reading of both Kentucky and federal common law principles, Georgetown National Bank did not have an unrestricted right over these funds and could not legally apply them towards repayment of McFarland’s debt without violating rights held by other creditors.