In the case of Portuguese-American Bank of San Francisco v. Welles (1916), the United States Supreme Court ruled in favor of the bank, reversing a decision by California's highest court. The dispute involved a loan made by the bank to Mr. Welles, who had provided collateral for it with shares from his own company. When he defaulted on his loan payments, the bank attempted to sell these shares but discovered that they were worthless due to fraudulent misrepresentation on part of Mr.Welles about their value at time when he pledged them as security for his debt obligation towards bank. The state court initially sided with Mr.Welles arguing that under California law, banks could not recover any deficiency after foreclosing on collateral unless there was an explicit agreement between debtor and creditor allowing such recovery which wasn't present here. However,the U.S Supreme Court disagreed stating that this interpretation would unjustly enrich borrowers at expense of lenders if applied universally because it would allow borrowers like Welles to escape full liability for their debts simply by pledging overvalued or worthless securities as collateral without disclosing true value thereof. Therefore,the Supreme Court held that even in absence of specific contractual provision permitting deficiency judgments,banks should be allowed to seek additional compensation from defaulting borrowers if initial foreclosure sale fails cover entire amount owed especially where borrower has misrepresented value or quality pledged assets thereby causing lender's loss.

The dissenting opinion in the case of Portuguese-American Bank of San Francisco v. Welles argued that the bank, as a creditor, had a right to protect its interests and should not be penalized for doing so. The justice disagreed with the majority's interpretation of California law regarding fraudulent conveyances, arguing it was too broad and unfairly prejudiced against creditors. He believed that there was no evidence to suggest any intent on part of the bank to defraud other creditors or act dishonestly; rather they were simply trying to secure repayment for loans given in good faith. Therefore, he contended that their actions should not have been deemed illegal under state law.