In Terrace et al. v. Thompson, the U.S Supreme Court upheld a Washington state law that prohibited non-citizens from owning or leasing land for farming purposes. The plaintiffs were Japanese immigrants who had purchased farmland through their American-born children to circumvent the law and challenged its constitutionality after they were prosecuted by the state of Washington. They argued that it violated their rights under both the Equal Protection Clause and Due Process Clause of the Fourteenth Amendment as well as treaty obligations with Japan. However, in a unanimous decision, Justice George Sutherland ruled that states have broad power to regulate property within their borders and can restrict ownership based on citizenship status without violating constitutional protections or international treaties. He also noted that while naturalized citizens are entitled to all privileges of native-born citizens, this does not extend to aliens who have not taken steps towards naturalization.

In the dissenting opinion for Terrace et al. v. Thompson, Justice Oliver Wendell Holmes Jr., joined by Justice Louis Brandeis, argued that Washington's Alien Land Law was unconstitutional because it violated the Equal Protection Clause of the Fourteenth Amendment. They contended that there was no rational basis for discriminating against Japanese immigrants in terms of land ownership rights and such discrimination could not be justified on grounds of public interest or welfare. The justices also criticized the majority's interpretation of treaty provisions between Japan and U.S., stating that these should not be used to uphold discriminatory laws at state level. Furthermore, they disagreed with the majority’s view about states' police power over property rights, arguing this power must still comply with constitutional guarantees like equal protection under law.