The San Joaquin and Kings River Canal and Irrigation Company v. County of Stanislaus case in 1913 revolved around the taxation of water rights. The plaintiff, an irrigation company, argued that its water rights were not taxable because they were intangible property under California law. However, the defendant county contended that these rights should be taxed as real estate since they are inseparable from the land itself. The U.S Supreme Court ruled in favor of the county, stating that while water is indeed movable and therefore could be considered personal property rather than real estate, it becomes part of the soil when used for irrigation purposes - thus making it subject to local taxes just like any other piece of land would be.

In the dissenting opinion for San Joaquin and Kings River Canal and Irrigation Company v. County of Stanislaus, Justice Holmes disagreed with the majority's view that a tax exemption granted by California to an irrigation company was not a contract protected from impairment under the U.S. Constitution. He argued that when California exempted certain property from taxation in 1887, it entered into a binding contract with those who would invest in such property based on this promise of non-taxation. The state could not later change its mind and impose taxes without breaching this agreement, according to Holmes' interpretation of constitutional law regarding contracts between states and private entities. This decision demonstrated his belief in strict adherence to contractual obligations as well as his skepticism towards broad interpretations of government power over private rights.