In the 1892 case Thompson v. Saint Nicholas National Bank, the U.S Supreme Court ruled on a dispute involving a bank's responsibility for honoring checks drawn by an individual who had previously been declared insane. The plaintiff, Thompson, was appointed as committee of his brother’s estate after his brother was declared insane in New York state court. Despite this declaration and appointment, the defendant bank continued to honor checks drawn by Thompson's brother from funds he held at their institution. When these transactions were discovered, Thompson sued to recover those funds from the bank. The Supreme Court held that once notice of insanity is given or known about someone holding an account with a financial institution such as a national banking association; it becomes illegal for them to pay out any money belonging to said person without proper authority (like that of a legal guardian). In this case since there was no evidence presented showing that St Nicholas National Bank knew about Mr.Thompson’s mental incapacity before they paid out on his check orders; therefore they could not be held liable for returning those funds back into Mr.Thompson’s accounts.

In the dissenting opinion for Thompson v. Saint Nicholas National Bank, Justice Brewer argued that the bank should not be held liable for accepting and crediting checks from a dishonest employee without verifying his authority to do so. He contended that it was unreasonable to expect banks to investigate every transaction or check presented by an individual who appears authorized based on their position within a company. Instead, he believed responsibility should lie with employers to monitor their employees' actions and prevent fraudulent activity. Furthermore, he suggested that if businesses were aware of this liability risk they would take more precautions in supervising their staff members which could potentially reduce instances of fraud overall.