In the case of Schmidt v. Bank of Commerce in 1913, the US Supreme Court dealt with a dispute over bankruptcy proceedings and property rights. The plaintiff, Schmidt, had filed for bankruptcy and claimed that certain properties were exempt from being used to pay off his debts because they were held as tenancy by the entirety (a form of ownership where both spouses have an equal undivided interest in a property). However, one of his creditors - Bank of Commerce - argued that these properties should be included in the bankrupt estate since they were acquired after he incurred debt to them. The court ruled against Schmidt's claim stating that under federal law at that time, only those properties which are exempted by state laws can be excluded from a bankrupt estate. Since Missouri’s state law did not recognize tenancy by entirety as an exemption during insolvency or bankruptcy cases when it comes to paying off creditors' claims; hence such assets could not be protected from being used towards settling outstanding debts. This ruling upheld creditor's rights over debtor's attempt to protect their assets through specific forms of ownership.

In the dissenting opinion for Schmidt v. Bank of Commerce, Justice Holmes argued that the bank should not be held liable for honoring a check presented by an individual who had previously been authorized to handle financial transactions on behalf of another person. He reasoned that it was unreasonable to expect banks to constantly monitor changes in their customers' personal or business relationships and adjust their practices accordingly. Instead, he suggested that it was more practical and fairer for individuals involved in such relationships to notify banks directly when any change occurs affecting banking transactions. Therefore, according to his view, unless there is clear evidence suggesting fraudulent intent or gross negligence on part of the bank, they should not bear responsibility if they were unaware of any changes in authorization status at the time a transaction took place.