In the case of Stockholders of The Peoples Banking Co. v. Sterling, Receiver (1936), the U.S Supreme Court was tasked with determining whether a receiver could recover dividends paid to stockholders when those payments were made from capital rather than profits. The bank in question had been declared insolvent and placed into receivership, at which point it was discovered that previous dividend payments had depleted its capital reserves contrary to state law. A group of stockholders argued they should not be held liable for these repayments as they had received them in good faith without knowledge of their illegal nature. The court ruled against the stockholders, stating that ignorance did not absolve them from liability since shareholders have an inherent responsibility to ensure their company is managed according to legal requirements. It further noted that allowing such defenses would undermine efforts to protect creditors by ensuring sufficient capitalization within banks and other corporations.

The dissenting opinion in the case of Stockholders of The Peoples Banking Co. v. Sterling, Receiver argued that the majority's decision to uphold a state law allowing for the reorganization and recapitalization of insolvent banks without stockholder consent was unconstitutional. This view held that such laws violated both due process rights and contractual obligations under the Constitution by effectively depriving shareholders of their property without fair compensation or legal recourse. It also contended that these laws unfairly favored creditors over shareholders, thereby undermining fundamental principles of equity and justice inherent in American jurisprudence.