In the 1890 U.S. Supreme Court case Kneeland v. American Loan and Trust Company, the court addressed a dispute over land ownership in Texas between Kneeland and the American Loan and Trust Company. The company had purchased bonds issued by Texas to finance railroad construction, which were secured by a lien on half of each alternate section of land granted to railroads for building tracks across public lands. When some railroads defaulted on their bond payments, the company sought to enforce its liens against all sections of land within twenty miles on either side of any part of a defaulting railroad's track - including those owned by Kneeland who was not involved with these transactions or defaults. The Supreme Court ruled in favor of Kneeland stating that only those specific parcels pledged as collateral could be seized upon default; other properties held by innocent third parties like Mr.Kneeland were not subject to seizure under such circumstances even if they fell within the geographical boundaries specified in general terms in bond agreements.

In the dissenting opinion for Kneeland v. American Loan and Trust Company, it was argued that the majority's decision to uphold a lower court ruling - which held that a mortgage given by a railroad company was valid despite not being authorized by its board of directors - undermined corporate governance principles. The dissenting justices contended that such an action should be considered invalid unless explicitly approved by those in charge of managing the corporation. They believed this principle is fundamental to maintaining order within corporations and protecting shareholders' interests. Furthermore, they disagreed with the majority's interpretation of state law regarding mortgages issued by railroads, arguing instead that these laws were designed to protect against unauthorized actions like this one. Thus, they felt the Court had erred in failing to invalidate the mortgage.