In the case of Toombs v. Citizens Bank of Waynesboro, 1929, the United States Supreme Court dealt with a dispute over a bank's right to offset debts owed by an individual against his deposits in that same bank. The plaintiff, Mr. Toombs had deposited money into his account at Citizens Bank of Waynesboro and later filed for bankruptcy. The bank used these funds to pay off loans that were due from Mr. Toombs without his consent or knowledge before he declared bankruptcy. The main issue was whether this action violated Section 60(a) of the Federal Bankruptcy Act which prohibits preferences within four months prior to filing for bankruptcy if it causes one creditor (in this case, the bank itself) to receive more than they would have under normal distribution procedures in a bankruptcy proceeding. The Supreme Court ruled in favor of Mr.Toombs stating that such actions indeed constituted preferential transfers as per Section 60(a). Therefore, banks could not use their depositor’s funds held on deposit at the time when they file for bankruptcy towards repayment of their own debt unless there is explicit agreement allowing them do so.

In the dissenting opinion for Toombs v. Citizens Bank of Waynesboro, it was argued that the majority's decision to uphold a Georgia statute allowing banks to offset debts with deposits during insolvency proceedings violated constitutional protections against impairment of contracts. The dissent contended that this law retroactively altered the terms and conditions under which depositors had initially entrusted their money to the bank, thereby infracating upon their contractual rights. It further asserted that such legislation should not be permitted simply because it might serve some perceived public good or convenience; rather, laws must always respect and uphold individual property rights as enshrined in contract law principles. This view held firm on upholding constitutionally protected liberties over state legislative powers.