In the case of Lion Bonding & Surety Company v. Karatz, the U.S Supreme Court ruled in favor of Lion Bonding & Surety Company, reversing a lower court's decision. The dispute arose when Mr. Karatz was appointed as receiver for a bankrupt company and secured bonds from Lion Bonding to ensure faithful performance of his duties. When he failed to perform these duties adequately, causing financial loss, Lion refused to pay on the grounds that they were not notified about his appointment within ten days as required by California law at that time (Section 1209). The lower courts held against this argument stating it was an unreasonable condition imposed by statute which could be waived implicitly or explicitly by parties involved. However, upon appeal in 1922, the Supreme Court disagreed with this interpretation and found that Section 1209 is mandatory and cannot be waived even if both parties agree otherwise because its purpose is not only to protect sureties but also creditors who may suffer due to misconducts of receivers like Mr.Karatz. Therefore it concluded that since notice wasn't given within stipulated period,Lion had no obligation under bond contract.

In the dissenting opinion for Lion Bonding & Surety Company v. Karatz, Justice Holmes disagreed with the majority's decision that a surety company was liable for an official’s misconduct even after his term had ended and a new bond had been issued by another company. He argued that this interpretation of liability extended beyond what was reasonable or intended in the contract between parties. According to him, when a public officer's term ends and he is reappointed without any express stipulation about liabilities from his previous tenure, it should be assumed that all obligations are discharged at the end of each term unless otherwise specified in writing. Therefore, he believed that once an official’s first term ended and they were reappointed under a new bond issued by another company, any subsequent misconduct could not be attributed back to actions taken during their initial appointment period covered by the original bonding company.