In the 1894 case of McGahan v. Bank of Rondout, the United States Supreme Court ruled on a matter involving bank deposits and bankruptcy law. The plaintiff, McGahan, had deposited money in the defendant's bank prior to its insolvency. Afterward, he filed a claim with the receiver for his deposit but was denied because he did not file within six months after publication by the Comptroller of Currency as required under federal banking laws at that time. He then sued to recover his deposit from shareholders who were liable for debts due to creditors under New York state law. The court held that although national banks are created by federal legislation and their activities regulated by it, they remain subject to state laws unless those conflict with federal statutes or frustrate Congress’s purpose in creating them. In this instance, there was no such conflict or frustration; hence New York State's liability rule applied against shareholders despite contrary language in National Banking Act about how receivers should pay off depositor claims. This decision affirmed that while national banks operate under Federal regulation they also must abide by relevant state laws where applicable.

The dissenting opinion in the case of McGahan v. Bank of Rondout argued that the majority's decision to uphold a lower court ruling, which held that a bank was not liable for damages after refusing to honor checks presented by an individual who had sufficient funds in his account, was incorrect. The dissent contended that this refusal constituted a breach of contract between the depositor and the bank. It further asserted that banks have an obligation to their depositors due to their fiduciary relationship and should be held accountable when they fail to fulfill these obligations without just cause or excuse. Therefore, it concluded, if there is no legal impediment preventing payment upon presentation of a check drawn against sufficient funds on deposit with them, banks should be required by law to pay such checks promptly or face liability for any resulting damages.