The U.S. Supreme Court case Lackawanna Iron and Coal Company v. Farmers' Loan and Trust Company in 1899 revolved around a dispute over the payment of bonds issued by the coal company, which had been purchased by the trust company. The coal company argued that it was not obligated to pay these bonds because they were issued under an unconstitutional law passed by Pennsylvania's state legislature, which allowed corporations to issue such bonds for public improvements without obtaining shareholder approval first. However, the court ruled against them stating that even if a law is later found to be unconstitutional, contracts made under it are still valid unless they directly violate constitutional rights or principles. Therefore, since there was no direct violation in this case, Lackawanna Iron and Coal Company was held liable for paying its bond obligations.

In the dissenting opinion for Lackawanna Iron and Coal Company v. Farmers' Loan and Trust Company, it was argued that the majority's decision to allow a corporation to deduct its debts from its capital stock before calculating taxes contradicted previous court rulings. The dissenters believed that this interpretation of tax law allowed corporations to avoid paying their fair share of taxes by artificially reducing their taxable income through debt deductions. They contended that such an approach undermined the intent of Congress when it enacted tax laws aimed at ensuring corporations contributed equitably towards public expenditures. Furthermore, they expressed concern about potential abuse where companies could accumulate large amounts of debt simply as a means to reduce their tax obligations.