In the case of Houston, Secretary of the Treasury, et al. v. Ormes, Administrator of Lockwood (1919), the United States Supreme Court was tasked with determining whether a federal tax on stock dividends constituted an unconstitutional direct tax without apportionment under Article I Section 9 Clause 4 of the U.S Constitution. The plaintiff argued that such a tax was indeed unconstitutional as it directly impacted property owners and thus should be apportioned among states based on their populations. However, in its decision, the court upheld Congress's power to levy income taxes on stock dividends without apportionment among states according to population size. This ruling affirmed that income derived from any source is subject to taxation under law and does not constitute an unlawful direct tax.

In the dissenting opinion for Houston, Secretary of the Treasury, et al. v. Ormes, Administrator of Lockwood (1919), Justice Oliver Wendell Holmes Jr., disagreed with the majority's decision to hold a federal officer personally liable for damages resulting from his official actions that were deemed unconstitutional by a court after they had been performed. He argued that such liability would deter public officials from performing their duties effectively and efficiently due to fear of personal financial ruin if their decisions are later found to be incorrect or unlawful in hindsight. Furthermore, he contended that it is unfair and unjustifiable to punish an individual who acted under color of law and in good faith belief in its constitutionality at the time when there was no clear precedent indicating otherwise.