In the case of Mercantile Trust Company v. Wilmot Road District, 1927, the U.S Supreme Court ruled in favor of Mercantile Trust Company. The company had purchased bonds issued by Wilmot Road District and later discovered that these were illegally issued due to a lack of proper authorization from local voters as required by Arkansas law. Consequently, they sued for repayment on their investment. The court held that even though the bonds were invalid under state law, federal courts would not necessarily be bound by this determination because it was made after the fact and did not affect whether or not there was an obligation to repay at inception (when the contract was formed). Therefore, despite being illegal under state law, since there existed a contractual obligation between parties at inception which both parties entered into willingly and with full knowledge of facts; hence it must be honored.

The dissenting opinion in the case of Mercantile Trust Company v. Wilmot Road District argued that the majority's decision to uphold a lower court ruling, which allowed for the reorganization of road districts and subsequent issuance of new bonds without consulting bondholders, was flawed. The dissent contended that this action violated contract rights protected under the Constitution’s Contract Clause. It asserted that such unilateral changes by government entities could undermine confidence in public securities markets if investors feared their investments might be devalued through similar actions in future. Furthermore, it suggested that allowing such practices could potentially lead to corruption or favoritism within local governments as they may manipulate district boundaries or financial obligations for personal gain or political advantage.