In the 1902 case of Rankin v. Chase National Bank, the U.S. Supreme Court was tasked with determining whether a bank could be held liable for damages when it refused to honor checks drawn on an account that had sufficient funds but was overdrawn due to previous unpaid checks. The plaintiff, Rankin, argued that he suffered financial loss and damage to his reputation as a result of the bank's refusal to pay his check despite having enough money in his account at the time it was presented for payment. However, Chase National Bank contended they were justified in their actions because there were already outstanding overdrafts on Rankin’s account from previously dishonored checks. The court ruled in favor of Chase National Bank stating that banks have no obligation or duty under common law or statute law to honor cheques if there are prior unpaid debts against an account even if there is currently enough money present within said account. This ruling established legal precedent regarding banking practices related specifically towards handling accounts with past due obligations.

The dissenting opinion in the case of Rankin v. Chase National Bank argued that the majority's decision failed to properly interpret and apply New York law, which was relevant to this case. The dissent believed that under New York law, a bank is not liable for paying on a forged check unless it can be proven that the bank acted negligently or in bad faith. In this particular case, there was no evidence presented suggesting negligence or bad faith on part of Chase National Bank when they paid out on checks with forged endorsements. Therefore, according to the dissenting justices' interpretation of applicable state law, Chase should not have been held responsible for covering losses resulting from these fraudulent transactions. They also expressed concern about potential negative implications their colleagues' ruling could have for banking operations and practices moving forward.