The Memphis City Bank v. Tennessee for the Use of Memphis case in 1895 revolved around a dispute over bonds issued by the city of Memphis, which were purchased by the bank. The state sued on behalf of the city to recover payment from these bonds. However, there was an issue regarding whether or not this suit could be brought forward due to previous legislation that had been passed stating that no action could be taken against any purchaser who bought bonds before January 1, 1876 if they believed them to be valid and paid full value for them. The Supreme Court ruled in favor of Tennessee and allowed it to sue on behalf of Memphis because it found that while such a law existed, it did not apply in this specific situation as there was evidence suggesting fraudulent activity involved with purchasing these bonds at less than their face value. Therefore, despite being protected under normal circumstances by said law from lawsuits related to bond purchases made prior to January 1st, 1876; those protections did not extend towards cases involving fraudulence.

In the dissenting opinion for Memphis City Bank v. Tennessee, it was argued that the majority's decision to hold the bank liable for funds lost due to its negligence was incorrect. The dissenting justices believed that while there may have been a breach of trust on part of the bank, this did not automatically make them responsible for making good any losses incurred as a result. They contended that in order to establish liability, it must be proven beyond doubt that such loss resulted directly from their negligent conduct and not from other factors or circumstances beyond their control. Furthermore, they disagreed with imposing an absolute duty on banks to ensure safety of deposits at all times irrespective of prevailing conditions or unforeseen events which might pose risks outside their reasonable control.