In the case of Oregon & California Railroad Company v. United States in 1914, the Supreme Court ruled that lands granted to railroad companies by Congress were subject to conditions outlined in their respective acts of incorporation and could be reclaimed by the government if those conditions were not met. The court held that a land grant made by Congress to aid in construction of railroads was not an absolute gift but rather a means for public development, with certain stipulations attached. In this particular case, it was found that Oregon & California Railroad Company had violated its agreement which specified selling parcels only to actual settlers at fixed prices. Instead, they sold large tracts at higher rates for profit-making purposes thereby violating terms set forth by Congress when granting these lands initially. Consequently, such actions allowed federal authorities to reclaim unsold portions of these grants.

In the dissenting opinion for Oregon & California Railroad Company v. United States, Justice Holmes disagreed with the majority's interpretation of the 1866 and 1870 Acts that granted land to the railroad company. He argued that these acts did not impose any trust upon the lands in favor of settlers but were simply contracts between Congress and the railroad companies. The intent was to encourage railroads' construction by offering them large tracts of land which they could sell at a profit, thereby financing their operations. According to him, there was no language in either act suggesting that Congress intended to create a trust relationship or limit how much money railroads could make from selling these lands. Therefore, he believed it was incorrect for courts later on to read such restrictions into those laws based on what they thought Congress should have done rather than what it actually did do.