In the 1898 case of Louisville v. Citizens' National Bank, the U.S Supreme Court ruled in favor of the bank. The city of Louisville had issued bonds to finance a railroad project and later refused to pay them on grounds that they were illegally issued. The Citizens' National Bank, which held some of these bonds, sued for payment. The court found that even if there was illegality in issuing the bonds, it did not absolve Louisville from its obligation to repay them because they were purchased by innocent parties who believed they were validly issued at that time. Therefore, as long as those holding such securities acted in good faith without knowledge or suspicion about any irregularities associated with their issuance, municipalities could not escape liability for repayment based on claims about illegal issuance.

In the dissenting opinion for Louisville v. Citizens' National Bank, Justice Harlan disagreed with the majority's interpretation of Kentucky law and its application to this case. He argued that under Kentucky law, a city could not be held liable for damages caused by defects in public streets unless it had been notified about those defects and failed to act within a reasonable time frame. In his view, there was no evidence presented that showed Louisville had such notice regarding the defect which led to injury in this case. Therefore, he believed that the judgment against Louisville should have been reversed rather than affirmed as it was by the majority decision. Furthermore, Justice Harlan expressed concern over potential financial burdens on cities if they were held responsible without prior notification of street defects.