In the case of United States Trust Company v. New Mexico, the Supreme Court ruled on a dispute involving bonds issued by New Mexico's territorial government in 1876. The bonds were sold to finance railroad construction and came with an explicit guarantee that they would be exempt from taxation. However, after achieving statehood in 1912, New Mexico passed laws taxing these bonds which led to a legal challenge by bondholders represented by the U.S Trust Company. They argued that this violated contract rights protected under Article I Section 10 of the Constitution (the Contract Clause). In its decision, however, the Supreme Court sided with New Mexico stating that while states are generally prohibited from passing laws impairing contractual obligations; there is an exception for their own contracts unless it was unmistakably clear at time of contracting that such power was surrendered. The court found no evidence suggesting such clarity existed when these particular tax-exempt bonds were issued and thus upheld their taxation as constitutional.

The dissenting opinion in the United States Trust Company v. New Mexico case argued that the majority's decision was a departure from established principles of contract law and constitutional interpretation. The dissenters believed that the state had not violated any contractual obligations by imposing a tax on railroad bonds, as there were no explicit provisions against such actions in the original agreement between parties. They also disagreed with the majority's view that this action constituted an impairment of contracts under Article I, Section 10 of Constitution, arguing instead for a more flexible interpretation which would allow states to exercise their taxing powers unless explicitly prohibited by contract terms. Furthermore, they contended that upholding such rigid interpretations could potentially hinder future legislative efforts to address changing economic conditions or public needs.