In the 1890 U.S. Supreme Court case Gurnee v. Patrick County, the court ruled on a dispute involving municipal bonds issued by Patrick County in Virginia to finance railroad construction. The plaintiff, Gurnee, was a bondholder who sued for payment after the county defaulted on its obligations due to financial difficulties following the Civil War and Reconstruction period. The defendant, Patrick County, argued that it should not be held liable because state law at that time did not explicitly authorize counties to issue such bonds. The Supreme Court disagreed with this argument and upheld an earlier ruling of Virginia's highest court which found that while there may have been no explicit authorization in state law for issuing these types of bonds; implicit authority could be inferred from other related statutes and legal principles governing local government financing activities during this era. Therefore, despite any ambiguity or lack of clarity in existing laws regarding municipal bond issuance powers at that time; local governments like Patrick County were still legally obligated to honor their debt commitments made under good faith towards creditors like Gurnee who had invested significant resources based upon those promises.

The dissenting opinion in the case of Gurnee v. Patrick County argued that the majority's decision to uphold a tax imposed by Patrick County on bonds issued by it was incorrect. The dissenting justices contended that such taxation violated the contract clause of the Constitution, which prohibits states from passing laws impairing contractual obligations. They asserted that when these bonds were issued, they were exempted from taxation under state law and this exemption formed part of the contract between bondholders and county authorities. Therefore, imposing a tax later would be altering terms of an existing agreement unilaterally, infringing upon rights granted to bondholders under their contracts with local government entities. Furthermore, they disagreed with majority’s interpretation about what constitutes impairment of contracts; for them even minor alterations could potentially violate constitutional provisions if they change essential elements or conditions initially agreed upon parties involved in any given contract.