Papers Relating to the Foreign Relations of the United States, 1918

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. the fact that payment in metallic currency was indicated shall not be considered as an express agreement, when the said stipulation is contained in printed skeleton or blank contract forms, and in cases where the debtor may have received paper currency or bills even though the document states that payment shall be made in metallic money. The stipulation that payment shall be effected in currency which may be in circulation shall be considered only as an obligation to pay in money of legal value, but the amount of the debt shall be reduced to metallic currency at the rate of exchange in effect on the date the obligation was assumed, in accordance with the table shown under Article 10, Section I of this law.

Art. 4. This law is applicable only to the unpaid portion of obligations, inasmuch as liquidations already made shall be considered as entirely valid, whatever may have been the class of money in which payment was made, excepting in cases of judicial suits where, by reason of common consent, the court may render a decision in regard to the legal validity of the act.

Art. 5. Obligations assumed after December 14, 1916, are not subject to this law; not being subject to the moratorium created by the law of the same date, they are subject to the corresponding civil laws.

Art. 6. Obligations relating to the banks of issue, which shall be governed by a special law, are also not subject to this law.

Art. 7. Lease contracts will continue to be subject to the provisions of Article 8 of the law of payments of December 24, 1917. Petroleum contracts signed prior to May 1, 1917, covering the leasing of lands for the exploitation of hydrocarbons or covering permit to do so under onerous title, shall continue to be governed by the law of the 9th instant.

[Article 8 of the law of payments of December 24, 1917:

Art. 8. Contracts covering leases are also not subject to this law; to these the following rules will be applied:

I. With respect to contracts made prior to December 14, 1916, the provisions of Articles 7, 8, and 9 of the decree of that date shall apply, excepting paragraphs (a) and (b) of Article 7, fraction II; it being understood that the owners may not increase the amount of rentals beyond that stipulated in the respective lease during such time as the house continues to be occupied.

II. With respect to contracts made after December 16, 1916, the provisions of the respective Civil Codes shall apply.]

[Articles 7, 8, and 9 of the law of December 14, 1916:

• Art. 7. Rental contracts are excepted from the moratorium; to these the following rules shall be made applicable:

  I. Unpaid rentals falling due prior to the date of this decree shall be subject to demand for payment in metallic money, on the basis of 20 centavos for each peso paper currency, taking into consideration in this respect, the corresponding increases mentioned in Article 37 of the law of payments. In the case of rentals after the 9th of September 1914, the amount in metallic money shall be fixed in accordance with the equivalents to be fixed by the Department of the Treasury by circular.

  II. Rentals after the date fixed by the preceding paragraph shall likewise be payable in metallic currency, in the proportions and under the conditions given below:

  (a) With regard to commercial establishments, agricultural firms and all kinds of mercantile concerns or industries, rentals up to 50 pesos shall be reduced to 50 per cent thereof; those from 50 to 100 pesos shall be reduced to 75 per cent thereof; and rents of over 100 pesos shall be payable in full.

  (b) With respect to residences, rentals of 30 pesos or less shall be reduced to 40 per cent; rentals from 30 to 50 pesos, shall be reduced to one-half, and those exceeding 50 pesos, to 75 per cent of the total.

• Art. 8. Rental contracts in effect at the present time, stipulating paper money and bearing a date after that of September 9, 1914, shall be considered subject to cancelation at the request of either party thereto, with notice by one of the parties to the other of 60 days.
• Art. 9. All rulings heretofore issued, which may conflict with the terms of this decree, shall be considered as modified in accordance with these provisions.]

Art. 8. As to the obligations to which this law refers, the moratorium is lifted, excepting in cases in which the creditors, debtors, or guarantors 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, as well as any other institution depending from the Federal Government, State governments, or municipalities, and official establishments of public instruction or similar private ones, with respect to the principal acknowledged in their favor, and under the following conditions:

Art. 9. The obligations referred to in fraction I, Article 1, of this law, shall be considered as having been contracted in silver currency, whatever may have been the terms in which the documents were drawn up, and with regard to these, the following rules will be observed:

I. Twenty-five per cent of the principal may be exacted, payable in national gold coin at par, without any reduction whatever.

II. The total amount of interest due from August 1913, inclusive to November 30, 1916, may be exacted, and shall be considered as due in paper money, payable in national gold at the rate of exchange in accordance with the table given under Article 10, fraction I of this law, using as a basis the rate in effect corresponding to the month in which the interest became due.

III. The total may be exacted on interest payments falling due prior to the month of August 1913, and on those which may have become due after November 30, 1916; these shall be payable at par and without any reduction.

IV. Payment may be demanded of interest falling due on and after December 1, 1916, on the unliquidated portion of the credit, payment to be made at par in national gold, without reduction.

Art. 10. As regards the obligations covered in fraction II of Article 1 of this law, the following rules shall be observed:

I. Twenty-five per cent of the principal may be demanded, payable in national gold based on the amount in gold which the debt may be reduced to after its conversion to metallic currency, taking as a basis the rate of exchange of the month in which the obligation was contracted, and giving to the paper peso a value in gold in accordance with the following table:

	1913	1914	1915	1916
January		.74	.28	.09
February		.69	.26	.08
March		.63	.22	.05
April	par	.58	.18	.07
May	par	.66	.17	.20
June	par	.65	.17	.12
July	.90	.62	.10	.10
August	.79	.53	.13	.07
September	.73	.40	.13	.05
October	.72	.40	.14	.03
November	.71	.39	.14	.015
December	.71	.37	.12

II. Payment of the total amount of interest due may be exacted, as well as interest which in the future may become due on the unpaid portion of the principal; interest due up to November 30, 1916, shall be calculated on the amount of principal reduced to metallic currency at the rate of exchange in the month the contract was made, and on the basis of this calculation, the interest shall be reduced to metallic money at the equivalent of exchange corresponding to the month in which it became due. Interest charges falling due on and after December 1, 1916, shall be computed on the principal reduced to gold as stated, and without any further reduction.

Art. 11. With respect to the obligations covered in fraction III, Article 1 of this law, the following rules shall be followed:

I. As regards obligations in which express agreement was made as to payment in metallic currency, 25 per cent of the same may be exacted, as well as the total amount of interest charges already due and those which in future may become due on the unpaid portion of the principal. Both the principal and interest shall be payable in national gold at par, without any reduction.

II. As to obligations in which agreement was expressly made for payment in bank notes of a certain bank, 25 per cent of the principal and the total amount of interest charges already due or which may fall due in the future, on the unpaid portion of the principal, may be exacted. The principal shall be payable in national gold on the amount thereof after it has been reduced to metallic currency in accordance with the table of equivalents to be issued by the Department of the Treasury. The interest charges shall be payable in national gold after they have been reduced to metallic currency. If the agreement calls for payment in bank notes, without any specific institution being mentioned, the debt shall be considered as having been contracted in paper money and shall be subject to the stipulations of the preceding article.

Art. 12. Obligations in which express agreement is made to make payment in a foreign currency, whatever the period may be in which the obligation was assumed, shall be payable in national gold, at the exchange rate on the day the obligation becomes due, in conformity with the table to be issued every 10 days by the Department of the Treasury.

Art. 13. The total amount of the debt, including interest and principal, on which the moratorium is lifted under the terms of this law, shall be paid by the debtors, whatever may be the nature of the obligation, in four bimonthly periods, in each of which partial payment shall be made equivalent to the fourth part of the indebtedness for principal and interest; it being understood that the first payment shall be made within two months from the date of demand by the creditor on the debtor, or from the date of the sentence handed down by the court in cases of litigation.

Art. 14. The debts to which reference is made in fraction IV, Article 1, are subject to demand for payment in full as regards both principal and interest, and shall be payable in accordance with the terms of agreement in each individual case.

Art. 15. Deposits made by orders of any authority, as well as confidential deposits made in closed and sealed packages or sacks, provided that they were not made with the banks referred to in Article 6 of this law, shall be returned in whole upon demand for the delivery of same, with the intervention of the proper authorities in each case. With regard to deposits made in currency declared to be of illegal circulation, the depositary shall be obligated only to furnish proof to the depositor of the delivery of the said currency to the appropriate office for destruction.

Art. 16. Persons who, under their contracts, may have made deposits in paper money, may not be accused of procrastination.

Art. 17. In cases in which deposits may have been made in paper money covering any obligation, if the court sentence declares the deposit to be legal, the creditor shall be obligated to receive the paper money deposited or the certificate which, under Articles 18 and 20 of the law of payments of September 25, 1916, may exist in place thereof, but he shall receive it only at the value in national gold which it may have had on the date of deposit, in accordance with the table given under Article 10, and the debtor shall be obligated to pay the difference between the value thereof and the amount of the original indebtedness. Should the court sentence declare the deposit to be illegal, the same shall remain at the disposition of the debtor.

Art. 18. Subject to this law, are:

I. Cases of deposits, whatever the status of court decisions, even where a definite judgment may have been rendered but not carried into effect, provided that the said judgment does not state the kind of money in which the payment shall be made.

II. Payments tendered in the presence of the administrative authorities, civil or military, provided that the debtor has not received back the amount tendered.

Art. 19. Obligations guaranteed by mortgages on city or rural property which may be in the hands of rebels against the Government, may not be exacted, either as to principal or interest, while the said occupation exists.

Art. 20. Suits which may be initiated by the creditors for compliance with the provisions of this law, may be brought at once in the courts, but the final judgments shall in all cases grant to the debtor the right to make payments within the periods and on the bases established by this law.

Art. 21. In the case of sequestration for default in payment of interest, the property sequestrated or given as a guarantee may not be disposed of or auctioned, excepting in cases where the income from the said property is insufficient to cover. In cases where the creditor proves that there exists a real danger that the property of the debtor may be disposed of or hidden for the purpose of avoiding compliance with the obligations under the moratorium, the Court may accept measures looking to the adoption of precautionary action, subject to the provisions of common law.

Art. 22. Subject to the same provisions and upon the petition of interested parties, or their legal representatives, the excess obtained from auctions may be assured, when the same should be applied to cover obligations not subject to demand by reason of the moratorium.

Art. 23. The debtor shall be liable for 50 per cent only of court costs for the collection of principal or interest with respect to which the moratorium is lifted, or for safeguarding debts covered by the said moratorium.

Art. 24. The obligations in which life insurance companies appear as the debtors, creditors, or guarantors, shall be governed by this law, excepting in the case of obligations as between the company and the insured arising from the same insurance contract, which latter shall continue to be subject to Articles 2, 3, 4, 5, and 6 of the law of the 1st instant until such time as the moratorium on the principal is lifted entirely. Obligations in which other insurance companies appear as creditors, debtors, or guarantors, shall be governed by special laws.

Art. 25. 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, as well as all other institutions dependent from the Federal Government, from State governments, or from municipalities, and official establishments of public instruction or similar private ones, with respect to the principals acknowledged in their favor, may at their option in each case, based on the moratorium of December 14, 1916, either choose to exact or to make payment of the obligations referred to in Article 1, in which they may appear as creditors, debtors, or guarantors. Should they decide to exact or to make payment, they shall be subject to the provisions of this law, with the following alterations:

I. The obligations shall be subject to demand in whole, both as regards the principal and interest charges.

II. When the case covers a mortgage credit on rural properties, the amount of the indebtedness, including principal and interest, shall be paid by the said institutions or their debtors, as the case may be, in four bimonthly periods, making payment in each period of a part equivalent to the fourth part of the indebtedness for principal and interest; it being understood that the first payment shall be made within two months from the date of the demand by the creditor on the debtor or from the date of the judgment in cases of litigation.

III. In cases of mortgage credits on rural properties, the payment of 50 per cent of the indebtedness and of the interest due, shall be made in four bimonthly periods to be computed as in the preceding paragraph, and the remaining 50 per cent in two additional bimonthly periods, the total payment being made within one year.

IV. Charitable institutions may not elect in favor of the moratorium in obligations in which they appear as creditors, excepting with the express approval of the President of the Republic through the respective department or the governor of the State, as the case may be.

Art. 26. The debts of private parties in favor of the Treasury of the Federal Government, Federal District or territories, which do not arise from taxation but which have the character of civil obligations, properly so-called, emanating from agreements or contracts made by the Federal, local or municipal governments with private parties, shall be subject to the rules contained in the preceding article.

Art. 27. In all cases in which the meaning of this law is not clear, the authority handling the case shall draw up a record containing all pertinent data, a copy of which, with a report, he shall send to the Department of the Treasury in order that the latter may return a decision to clear up the question.

Art. 28. Anyone interested in the application of this law may consult the Department of the Treasury, making mention of the point in the provisions thereof which may appear doubtful.

Art. 29. As regards disputes between private parties arising from the application of this law, those interested may use administrative channels to secure a decision, and for this purpose they shall address a statement to the Department of the Treasury containing all necessary data, and the latter shall settle the dispute, on condition that both parties are agreeable to abiding by the decision, it being understood that should choice be made of the administrative channels, they may not afterwards apply to the courts.

Transitory Articles

I. Former laws and rulings which may conflict with this law, are hereby canceled.

II. This law shall go into effect from the date of its publication in the Diario Oficial of the Federation.

Therefore, I hereby order that same be printed, published, circulated, and that due consideration shall be given to it.

Given at the National Palace of the Executive Power in Mexico, on the thirteenth day of April, of the year one thousand nine hundred and eighteen.

V. Carranza

[rubric]

1. Diario Oficial, April 17, 1918. Paragraphs inserted in brackets were taken from El Universal, April 18, 1918.