In the case of Hanover National Bank of New York v. Suddath, Receiver of American National Bank of Abilene in 1909, the U.S Supreme Court was tasked with determining whether a national bank could be held liable for accepting deposits from another insolvent national bank. The American National Bank had deposited funds into the Hanover National Bank while it was insolvent and subsequently went bankrupt. The receiver appointed to manage the affairs and assets of the failed bank sued Hanover to recover those funds on behalf of creditors who were left unpaid after bankruptcy proceedings. The Supreme Court ruled that under federal banking law, a solvent national bank (in this case, Hanover) is not responsible for knowing or investigating whether another national bank depositing money into its accounts is solvent or not at any given time. Therefore, they are not liable if such a depositor later becomes insolvent. This decision protected banks from potential liability when dealing with other financial institutions and clarified their responsibilities under federal banking laws.

In the dissenting opinion for Hanover National Bank of New York v. Suddath, Receiver of American National Bank of Abilene, Justice Holmes disagreed with the majority's interpretation that a bank could not be held liable for accepting deposits from another insolvent bank. He argued that when a national bank receives money under circumstances which would make it an act of bankruptcy if done by an individual or corporation, then such receipt is voidable and can be reclaimed by the receiver in case the depositing institution goes into receivership within four months. Therefore, he believed that Hanover should have been held accountable because they had reasonable cause to believe that American was insolvent at the time they accepted their deposits. The justice also pointed out inconsistencies in how different types of financial institutions were treated under similar circumstances and suggested this needed rectification.