Missouri & Arkansas Lumber & Mining Co. v. Greenwood District
Headline: Court upholds Arkansas law barring interest on county judgments, blocking a creditor’s claim for additional interest and making it harder for counties to be required to pay extra interest later.
Holding: The Court ruled that Arkansas’s 1893 law preventing judgments against counties from bearing interest does not violate the Federal Constitution and therefore bars the creditor’s claim for further accrued interest.
- Allows states to stop interest from accruing on judgments against counties.
- Creditors can only recover interest that accrued before the law changed.
- If debt instruments originally bore no interest, creditors face limited recovery.
Summary
Background
A holder of county warrants sued Sebastian County after receiving a federal-court judgment entered January 26, 1891 that directed interest at six percent per year. The county had issued non-interest-bearing warrants around 1889. The judgment was revived in 1900 and 1910. Between 1896 and 1914 the county paid amounts that the county says equal the warrants’ face value plus interest computed to March 21, 1893 and all costs. In 1893 the Arkansas legislature passed a law saying no judgment against any county shall bear interest after that law’s passage. On May 23, 1916 the creditor asked a court for a mandamus to force additional interest payments; the county denied liability and asked the court to mark the judgment satisfied. The trial court refused the mandamus and directed satisfaction.
Reasoning
The narrow question was whether giving effect to the Arkansas 1893 law violated the Federal Constitution’s contract clause or the Fourteenth Amendment’s protection against taking property without due process. The Court relied on prior decisions holding that whether interest runs on a judgment is a matter of legislative policy, not a private contract right. A judgment owner is entitled to interest accrued up to the time the legislature changes the rule, but after that the owner’s right to interest depends on what the legislature prescribes. Because the creditor had received payments the Court treated as covering what was due up to the statutory change, the statute did not deprive the creditor of property without due process.
Real world impact
The ruling lets a State limit or stop interest on county judgments and prevents creditors from collecting interest accrued after a lawful change in state law. The opinion also notes a different outcome might follow if the original warrants had expressly promised interest.
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