In the case of Toyota v. Territory of Hawaii (1912), the U.S Supreme Court was asked to review a decision by the Hawaiian government that imposed taxes on imported goods, specifically rice from Japan. The plaintiff, Mr. Toyota, argued that this tax violated his rights under an 1894 treaty between Japan and Hawaii which stipulated free trade between both nations without any import duties or restrictions. However, since Hawaii had become a territory of the United States in 1898 following its annexation, it was subject to American laws including those related to taxation and tariffs. The court ruled against Mr. Toyota stating that when Hawaii became part of America's territories; it also adopted all existing federal laws including those governing customs and imports which superseded previous treaties made by independent states like pre-annexation Hawaii with other countries such as Japan. Therefore, despite having a prior agreement for duty-free trade with Japan before becoming an American territory; post-annexation Hawaiian authorities were within their legal right to impose taxes on Japanese imports according to prevailing US law at that time.

In the dissenting opinion for Toyota v. Territory of Hawaii, it was argued that the court majority erred in its interpretation and application of Hawaiian law regarding land ownership. The dissenting justices believed that Mr. Toyota had a valid claim to the property in question based on his purchase from Mrs. Bishop, who they asserted did have legal authority to sell it despite her husband's absence due to leprosy-related exile at Kalaupapa Settlement on Molokai Island. They contended that under Hawaiian law, spouses were allowed separate control over their individual property interests and thus Mrs. Bishop could legally transfer her interest without needing consent from her exiled husband or his guardian ad litem appointed by courts due to his incapacity caused by illness.