Mr. Hay to Mr. Clayton.

No. 263.]

Sir: The Department has given careful consideration to your note of September 1, 1897, to the Mexican Government, a copy of which was inclosed with your No. 96 of that day’s date, and to the Mexican Government’s answer, transmitted with your No. 152, of October 21, 1897, in relation to the claim growing out of the “Pious Fund of the Californias.”

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The Department approves your action and regrets the inability of the Government of the United States to admit that diplomatic intervention is premature.

The claim presented is for interest accrued on the “Pious Fund” since February 1, 1869. It is based on the same facts on which a like claim for interest was presented to the Mixed Commission organized under the convention of July 4, 1868. The validity of that claim, and the liability of the Mexican Government to the claimants therefor, were adjudged by the umpire.

By the highest authorities, as well as by the very reason of the rule, the effect of a judgment extends not merely to its final and decisive sentence, but to every point at issue between the parties to the suit and which must necessarily have been decided. If its effect were confined, as urged in the Mexican note, to “the conclusion of a sentence or decision,” the whole matter in issue might be the subject of a new litigation in a suit for a fresh recovery of the same debt. But to avoid effects so absurd the well-recognized doctrine is that all facts in issue and essential to support the judgment are deemed to be thereby forever established between the parties; they constitute the foundation of the judgment itself and are included in the exceptio rei judicatae. It is therefore necessary and allowable, in order to give efficacy to the rules of res judicata, to reason back from a judgment to the basis upon which it stands, upon the principle that where a conclusion is indisputable and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion. Accordingly the Lord Chief Justice Kenyon, of England, held that a judgment is conclusive between the same parties upon the same matter directly in question in another court, and is equally conclusive upon the same matter between the same parties coming incidentally in question in another court for a different purpose.

The sequestration of the “Pious Fund” by the Mexican Government, and its acknowledgment of its obligation to pay 6 per cent interest per annum on the fund for the object of the charity are undisputed and indisputable facts. These facts and the liability of the Mexican Government to pay that interest in equitable proportions to the beneficiaries have all been solemnly adjudged. And notwithstanding the objection urged in the Mexican note that the doctrine of res judicata is not rigidly applicable to the case, it can not be doubted that upon principles of international justice and good faith facts from which liabilities inevitably spring, having once been fairly, fully, and judicially established between sovereign States, should be accepted as conclusive.

You will therefore continue to urge the claim diplomatically, requesting its payment. The former case was finally disposed of through diplomatic methods; and no reason is perceived why the same method should not be adopted in this. The accrued and unpaid interest of the claim should, by the decision of the case, be equitably apportioned among the beneficiaries. An international tribunal is alone competent to make such a decision at once final and conclusive upon both Governments and all parties. The decision of the former commission was of this character, and the Government of the United States, in view of the friendly relations existing between the two Governments, would be inclined to apply the principle of that decision in the adjustment of this claim.

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You are at liberty, if requested, to furnish the Mexican minister a copy of this instruction.

I am, sir, etc.,

John Hay.