File No. 812.51/418
[Enclosure]
Mr. George W.
Cook to the Secretary of
State
Mexico,
February 20,
1918.
Sir: I beg to enclose herewith a
memorandum,1
supported by eminent legal opinion, regarding the new “Law of
Payments” decreed by President Carranza of Mexico under date of
December 24, 1917, and the injury which the application of this
decree works to the rights and interests of American citizens
who are the owners of mortgages and other credits affected by
this decree.
In common with many other American citizens resident in Mexico, I
have in past years invested large sums in mortgages which
stipulated the payment of both capital and interest in gold or
silver coin of the weight and fineness prescribed by the Mexican
law.
During the so-called “Pre-Constitutional Period” great quantities
of paper money were printed and issued by the Carrancistas, and
forced upon the public both by decrees and by the bayonet. That
money never had any intrinsic value, nor was there any specific
metallic guaranty back of it. It was “fiat money” pure and
simple, and its value in the market declined from an artificial
and forced par at the time of its first issue in April 1913 to
zero in December of 1916. At present, none of this fiat money is
of legal circulation.
During the circulation of this paper money, numberless creditors
were forced to accept it at par in full payment of obligations
contracted to be discharged in gold or silver coin. I myself,
under pressure of the circumstances and forced thereto by the
prevailing decrees and military and police regulations, received
large amounts of this paper money in payment of interest on
mortgages, book accounts for merchandise sold, rents, etc. But
in spite of all efforts made to force me, by citation before
executive authorities, threats of the wrath of the military
powers, and deposits in the courts, to accept this paper money
in payment of the capital of mortgages contracted to be paid in
gold or silver coin, I have managed up to date to avoid
receiving such fiat money in payment of capital sums due me on
mortgages, although various suits against me are still pending
in which the mortgage debtors deposited the paper money in the
court and demanded its acceptance by me in full discharge of
their coin obligations.
Now, this new “Law of Payments” has been decreed, without even
the color of right or legality, by which it is proposed to force
creditors, in certain specified cases, to receive payment of the
interest due them in gold or silver coin under the terms of
their contracts, at the rate of the coin value of the paper
money in the local market on the day that the interest matured,
as per a table of equivalents set forth on page 2 of the
accompanying memorandum. As most of the unpaid interest on
obligations is that which matured in the latter part of 1915 and
in 1916, the result of the application of the decree will be to
compel the creditor to accept in full discharge, anywhere from
13 per cent down to 1½ per cent of the par value of the interest
due him in gold or silver coin. The injury and injustice to
American citizens resulting from this procedure are too obvious
to require comment. My personal loss, under the most favorable
interpretation possible of the decree, will amount to about
45,000 pesos; but under other interpretations which are more
likely to be adopted, my loss will be several times that amount.
If we are compelled to accept these losses under this decree, in
addition to the tremendous losses we have heretofore sustained
due to illegal revolutionary activities, our situation will
indeed be difficult.
In view of the partial lifting of the moratorium which has so
long covered obligations for the payment of interest, I am
bringing several suits in the courts to recover interest due me
in gold or silver coin, with the expectation that the lower
courts, at least, will uphold the application of the decree, in
which case it is my intention to carry the matter to the highest
courts of Mexico. Should justice be denied me in the courts of
Mexico, I wish then to seek the intervention and support of the
American State Department.
[Page 644]
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,
