If this decree is successful in despoiling us of a great part of the interest due us in coin, I conceive that a serious danger exists that when the time comes to lift the moratorium in regard to the payment of the capital sums due on mortgages and other credits. an effort will be made through a new decree to work a similar spoliation in regard to such capital; and for this reason, it would seem all the more necessary to make a stubborn opposition to the application of the present decree. In the meantime, any expression of opinion or any advice in relation to the matter herein treated of, from the Department of State, would be most helpful to Americans in Mexico and would have our grateful appreciation. Very respectfully yours, GEORGE W. COOK File No. 812.516/206 The French Ambassador (Jusserand) to the Secretary of State [Translation] WASHINGTON, March 16, 1918. My Government brings to my notice the jeopardy in which it thinks that foreign capital invested in Mexico is put by the bill providing for the creation, under the name of Bank of the Mexican Republic, of the one bank of issue contemplated by the last Carrancista Constitution. Article 10 of the bill provides, in its last part, that joint stock companies shall deposit in the said bank the reserves that they are obliged to have in coin. On account of the large number of such companies doing business in Mexico, the deposit would make up a large sum consisting almost exclusively of foreign capital which would thus be placed at the uncheckable disposal of the Mexican Government. The attitude assumed by it toward foreign funds justifies a fear that the provision under consideration is but hiding Mr. Carranza's desire to secure by that means funds for current expenses which he could only obtain heretofore through the ordinary course of a loan, or even his intention purely and simply to appropriate to his own use the said revenues at some time or other. The Government of the Republic has made its fears known to its representative in Mexico and directed him to consider with his colleagues concerned the advisability of making to the Mexican Government the joint representations that such a measure warrants. In compliance with my Government's instructions I have the honor to bring the foregoing to your excellency's knowledge and to beg you kindly to let me know whether you would not be disposed to have these views and what measures the Federal Government would be willing to take to meet the above-mentioned awkward situation. Be pleased to accept [etc.] JUSSERAND The Secretary of State to the Ambassador in Mexico (Fletcher) [Telegram] WASHINGTON, March 28, 1918, 6 p. m. 925. Department learns through French Ambassador here that his Government considers last sentence Article 10 of bill concerning bank of issue objectionable, because it would place large sums of foreign capital at disposal of Mexican Government, which might use them to pay current expenses, thus obviating necessity for loan, or even at some time appropriate them outright. French Government suggests joint representations of diplomatic representatives in Mexico City. Telegraph your views on points raised, and what measures you consider advisable for this Government to take. LANSING File No. 812.51/418 The Secretary of State to the Ambassador in Mexico (Fletcher) No. 504 WASHINGTON, April 4, 1918. SIR: The Department acknowledges receipt of the Embassy's No. 798 of February 20, 1918, with which were enclosed a letter addressed to the Secretary of State by George W. Cook, 2a Calle de Madrid No. 35, Mexico City, and an opinion of Attorney Julio Garcia, of Mexico City, relating to the new law of payments, partly lifting the moratorium for the payment of money obligations, decreed by President Carranza on December 24, 1917. In the opinion of the Department the provisions of Articles 1 and 10 of the decree with reference to two classes of obligations, namely, those which by their terms are payable in specie and those which, though payable generally, were contracted in the period of metallic money or prior to April 1913, and therefore intended to be payable in specie or in paper money equivalent in value, are open to objection on three grounds, viz.: 1. They reduce, on the basis of fixed ratios of equivalence of paper money in national gold, the amount of interest payable, and therefore amount to an impairment of the obligations of contracts, thus working an injustice upon creditors. 2. They are retroactive in character, and therefore unjust and also violative of the following provision of Article 14 of the Mexican Constitution, to the detriment of creditors: No law shall be given retroactive effect to the prejudice of any person whatsoever and 3. They deprive creditors of their property without due process of law, thus working by way of confiscation an injustice and also violating the following provisions of said Article 14 of the Constitution: No person shall be deprived of life, liberty, property, possessions or right without due process of law instituted before a duly created court in which the essential elements of procedure are observed and in accordance with previously existing laws. You will please inform the Foreign Office of the foregoing, stating that the Government of the United States cannot be expected to recognize the right of the Mexican Government to apply the objectionable terms of the decree to American citizens, and that it will so advise those of its citizens who may seek its advice. You will also inform Mr. Cook of the nature of these instructions, and in response to his request for an expression of the Department's opinion or its advice, you may state to him that the Department considers that in pursuing his legal remedies, he has adopted the appropriate course. I am [etc.] For the Secretary of State: File No. 812.516/208 The Ambassador in Mexico (Fletcher) to the Secretary of State No. 924 MEXICO, April 17, 1918. SIR: With reference to the Department's telegram No. 925, March 28, 6 p. m., relative to the objection raised by the French Government to Article 10 of the law governing the Mexican bank of issue, I have the honor to report that it is apparent that nothing may be accomplished at this time by individual or joint protest, and for this reason I suggest that no representations be made at present. HENRY P. FLETCHER I have [etc.] File No. 812.512/1947 The Ambassador in Mexico (Fletcher) to the Secretary of State MEXICO, April 24, 1918. No. 952 SIR: I have the honor to transmit herewith a translation of a presidential decree issued April 13, 1918, establishing a Federal tax of 10 per cent on payments made on mortgages signed prior to April 15, 1913, provided such payments may be demanded at common law at the date the decree is issued, or may be subject to demand prior to December 31, 1919. This decree was issued on the same day as the presidential decree raising the moratorium on debts in general, referred to in Article 7 of the enclosed decree as the "Law of Payments". I have [etc.] [Enclosure-Translation] HENRY P. FLETCHER Decree of April 13, 1918, establishing a Federal tax on mortgage payments1 I, Venustiano Carranza, Constitutional President of Mexico, to the people thereof make known: That in use of the extraordinary powers in the Treasury with which I am vested by the Congress of the Union, have seen fit to decree the following: ARTICLE 1. A Federal tax is created on mortgage payments. ART. 2. Mortgage credits which come under the following conditions are subject to the tax referred to in the preceding article: I. That the mortgage was created to guarantee the payment of a financial obligation. II. That the contract was signed prior to April 15, 1913, and that payment thereof may be demanded under common law at the time this is issued, or payment of which may be subject to demand prior to December 31, 1919. ART. 3. Mortgages created in the same deed covering the sale of the mortgaged property, are included in the provisions of the preceding article. ART. 4. The tax shall be payable by the mortgage creditors, and shall become due upon receipt by the creditor of payment of the debt either in part or in whole, whether payment is made with money or by means of the delivery of property, personal or real; it being understood that the tax shall be made applicable on amounts paid for account of the principal and not on those made for account of interest. ART. 5. With respect to payments made to mortgage banks, in which are included both principal and interest, the amount corresponding to each shall be fixed in accordance with tables to be issued by the Department of the Treasury, and the tax made applicable to the portion corresponding to the principal. ART. 6. Mortgage credit renewals shall be considered, for the purposes of this law, as payment made, and shall be subject to taxation on the total amount of the credit. The same shall apply when an extension of time is granted by the creditor to the debtor, for the payment of the principal on expired mortgages, it being understood that once the tax has been paid upon granting extension, the credit shall not again be subject to taxation when payment thereof is made. ART. 7. The rate of taxation shall be 10 per cent on payments made by the debtor of partial liquidations, or on those payable by him under the terms of the law of payments of this date; of this amount, 1 per cent shall be for the. municipality in which the property is located, 1 per cent for the State, Federal District, or Territory, and 8 per cent for the Federation. The Department of the Treasury shall make payment bimonthly to the local municipalities and governments of the amounts corresponding to them for this account. ART. 8. The tax shall be collected by means of ordinary documentary stamps bearing the over-seal "Mortgages." ART. 9. The tax shall not be made applicable to payments made for account of mortgages in which the creditors are: Charitable institutions; the Caja de Préstamos para Obras de Irrigación y Fomento de la Agricultura, the Caja de Ahorros y Préstamos de la Policía del Distrito Federal, and other institutions depending from the Federal Government, State governments, municipalities, and official establishments of public instruction. ART. 10. Notaries before whom it is desired to draw up a public document covering the total or partial payment of a mortgage guaranteeing a loan of money, or covering the renewal of a mortgage credit, or an extension granted by the creditor to the debtor for the payment of the principal, shall, based on the data given in the document or documents, make out a special liquidation of the amount payable for account of taxes under Articles 5, 6, 7, and 8 of this law, and shall deliver to the parties interested a note showing the liquidation, which shall be presented to the corresponding stamp office. Furthermore, the party interested shall prove by means of a written statement issued by the person in charge of the stamp office, that he purchased there the necessary stamps, and that the latter are to be used to cover the tax to which this law refers on the mortgage credit under consideration, and the notary shall make a record in the public document covering the transaction, that he has seen the said statement. The respective public documents can not in any case be authorized until the notary has satisfied himself that the liquidation has been approved by the stamp office, that the stamps required to cover the tax have been affixed to the note, and that the requirement for the presentation or insertion of the statement covering the purchase has been complied with. ART. 11. In cases where the cancelation of the registration is to be effected by virtue of a public document, those in charge of mortgage matters may not do so until they are satisfied that the notary has complied with the provisions of the preceding article. ART. 12. Judges in the entire Republic handling cases in which the cancelation should be ordered of a mortgage registration covering credits subject to the provisions of this law, may not issue a decision in the matter until opportune advice has been given to the stamp office and the necessary steps have been taken for payment of the tax by the creditor. ART. 13. After 11 days from the date of payment of the mortgage credit, or upon expiration of the term fixed by the judge for presenting proof of payment by the creditor of the tax without the said payment having been effected, the debtor may, in order that cancelation may be made, pay to the stamp office the amount corresponding to the tax, and in such case the debtor shall have a claim on the creditor for the amount of the payment for account of the tax made by him. ART. 14. Taxpayers who fail to liquidate all or any part of the tax created by this law, as well as the judges and notaries who through negligence fail to take the steps necessary to have paid the entire amount of the tax or any part thereof, shall be subject to a fine equivalent to the amount left unpaid, the taxpayers, when the circumstances require, being also subject to the payment of the amount in stamps left unpaid. ART. 15. The collection of the tax covered by this law does not allow for the payment of fees to stamp tax collectors. ART. 16. In cases not provided for by this law with respect to the tax created by it, the provisions of the Federal stamp tax law issued on June 1, 1906, shall be made applicable thereto. I, therefore, order that this be printed, published, distributed, and given due compliance. Given at the Palace of the Executive Power in Mexico, on the thirteenth day of April, nineteen hundred and eighteen. V. CARRANZA [RUBRIC] File No. 812.51/430 The Ambassador in Mexico (Fletcher) to the Secretary of State No. 959 MEXICO, April 24, 1918. SIR: I have the honor to enclose, herewith, the text and translation of a presidential decree signed April 13, 1918, lifting the moratorium on interest charges and 25 per cent of the principal of all legal debts contracted during the period of metallic currency prior to April 15, 1913, on debts contracted during the paper-money period from April 15, 1913, to November 30, 1916, and on those contracted during the same period to be paid in a specified class of currency, and also on debts contracted between November 30, 1916, and December 14, 1916. I have [etc.] HENRY P. FLETCHER [Enclosure Translation] Law of payments, lifting the moratorium on interest charges and on 25 per cent of the principal1 I, Venustiano Carranza, Constitutional President of the United Mexican States, to the people thereof make known: That in the use of the extraordinary powers with which I have been vested by the Congress of the Union, I have seen fit to decree the following: ARTICLE 1. This law shall cover, and the effects thereof shall be applicable exclusively to obligations the payment of which may be subject to demand under common law, on condition that they were assumed: I. Prior to April 15, 1913; that is to say, during the time that metallic currency was in circulation. II. During the time fiduciary money was in circulation; that is, from April 15, 1913, to November 30, 1916. III. During the same period and with respect to obligations which may be considered as contracted in a specific class of currency. IV. Within the period from November 30 and December 14, 1916. ART. 2. For the application of this law, obligations which might have been renewed prior to April 15, 1913, shall be considered as having been assumed after that date, in accordance with Article 1606 and following articles of the Civil Code of the Federal District. [Article 1606 of the Civil Code: A renewal of contract takes place when the parties thereto make substantial modifications, making it subject to different terms and conditions; substituting a new debt for the old, or making any other modification which essentially affects the contract, and which indicates the intention to create a new obligation in lieu of the old.] ART. 3. With respect to obligations assumed during the time fiduciary currency was in circulation, or which may have been renewed during such period. 'Diario Oficial, April 17, 1918. Paragraphs inserted in brackets were taken from El Universal, April 18, 1918. |