File No. 812.51/450

The Ambassador in Mexico ( Fletcher) to the Secretary of State

No. 1374

Sir: With reference to my despatch No. 959, of April 24, 1918, enclosing a translation of the law of payments of April 13, 1918, I have the honor to transmit, herewith, the text and a translation of circular No. 38 of the Department of the Treasury and Public Credit publishing certain decisions of President Carranza rendered for the purpose of facilitating the settlement of disputes between creditors and debtors concerning the amount of a debt under the terms of the law in reference.

I have [etc.]

Henry P. Fletcher
[Enclosure—Translation]

CIRCULAR NO. 382

Certain doubts having arisen as to the proper interpretation of the law of payments of April 13, 1918, in connection with the obligations hereinafter referred to, the citizen President of the Republic has directed that the following necessary explanations be made to facilitate the solution of the disputes between creditors and debtors arising out of the fixing of the amount of an obligation in money.

These doubts refer to the following cases:

1.
As regards stock companies organized prior to April 15, 1913, how payments should be considered which may have been made by shareholders in paper money under assessments decreed during the period such paper was in circulation, upon unpaid capital or covering new issues of shares made during that time; also the form in which payment should be made of balances in such companies in favor of certain shareholders for account of shares liquidated, expired, or canceled within the period April 15, 1913, to November 30, 1916, if the creditor has not made use of such amounts.
2.
The amount of the capital of stock companies organized during the period paper money was in circulation, in relation to the payments made by shareholders to cover the amount of capital subscribed to by each; also the form in which liquidation should be made for amounts in such companies for account of balances in favor of certain shareholders to cover shares liquidated, expired, or canceled within the period April 15, 1913, to November 30, 1916, if the creditor has not made use of such amounts.
3.
Moneys delivered under accounts current, in order to decide if they should be considered separately as special obligations subject or not to reduction by reason of the period and class of money in which payment was made, or if they [Page 657] should be considered as payments covered by Article 4 of the said law and, therefore, valid for their full face value without modification of any kind.
4.
The value of documents of credit or vales (promissory notes) to bearer, issued without authority of the Government by private concerns, during the period April 15, 1913, to November 20, 1916, in order to estimate, in metallic currency, the amount which may be demanded for such documents; likewise the value of the so-called bank-to-bank checks, issued during the said period.
5.
The fixing of the amount of an obligation emanating from a transaction of purchase and sale, and representing the price fixed for the same by the contracting parties, taking into account the reductions of money obligations established by Article 10 of the law of April 13, 1918, hereinbefore mentioned, which according to the said article, should have as a basis the rate of equivalence for the month in which the obligation was contracted, and such equivalence refers to the value of paper money in metallic currency for the purpose of equalizing the amount received by the debtor in paper with that which the creditor should receive in metallic currency at the time of payment; and as such balance of values can not take place when the debtor did not receive paper money but received a movable or immovable object whose price represents the pecuniary obligation which the debtor should cover in metallic currency, in such cases the ordinary rule of money equivalents is not applicable and it is necessary to establish others which will be equitable and just, in accordance with which the debtor shall have to pay the true value of the object he received by virtue of the contract.
6.
If the indebtedness of private individuals to State treasuries should be subject to the provisions of Article 25 of the law of payments.
7.
If the obligations contracted expressly in Vera Cruz paper money after the month of April 1916 shall, for the liquidation thereof, be subject to the equivalences fixed by the table included under Article 10 of the law of payments, or if the said table should be considered as applicable only to obligations contracted in the so-called infalsificable paper.

In virtue thereof, this Department, complying with the instructions of the citizen President of the Republic, has seen fit to decide:

I. As regards stock companies organized prior to April 15, 1913, there are included in Article 10 and relative articles of the law of payments of April 13, 1918, the money payments which the shareholders may have made in paper currency in connection with the assessments which may have been pending payment or which may have been decreed during the circulation of said paper for account of capital or of new shares issued; in consequence, the amount of such payments shall be fixed by reducing the nominal value thereof to metallic currency in accordance with the table of equivalences contained in Article 10 mentioned.

With respect to the assessments and subscriptions stated which are unpaid and should be covered, the same shall be paid by the shareholders in metallic currency at par. In such companies, the amounts which may exist as a balance in favor of some shareholder for account of shares liquidated, expired, or canceled in the period April 15, 1913, to November 30, 1916, if the creditor has not used such amounts, shall be liquidated by the company in conformity with the table given under Article 10. As regards shares which have not been liquidated, expired, canceled, or retired; that is, which are in effect, if the shareholder prefers to retain his right to the integral value of his share in national gold, the assessments paid by him at the time paper money was in circulation shall be calculated in conformity with the said table, and he shall be obligated to complete, in national gold the difference based on the value of the assessments paid by him. If the shareholder should have received such amounts, the payment shall be considered as coming within the terms of Article 4 of the law of payments of April 13, 1918.

II. The capital of stock companies organized during the period of paper money, comes within the terms of Article 10 and relative articles of the law of payments of April 13, 1918, and consequently, the amount thereof as well as the money contributions of each shareholder shall be fixed by reducing the value (nominal) of the respective amounts to metallic currency, in accordance with the table contained in the article stated. There are also included in said Article 10 and relative articles of the said law of payments, the obligations contracted by such companies in favor of shareholders during the period of fiduciary circulation, and which constitute a credit for liquidated shares, or shares which have expired or been canceled, in favor of the said shareholders.

[Page 658]

Consequently, the amount of the said obligations shall be fixed by reducing the nominal value thereof to metallic currency, according to the table of equivalences contained in the said Article 10.

III. Payments made by either party in current account and partial payments corresponding to periods stipulated in contracts, are included in the precepts of Article 4 of the law of payments of April 13, 1918, and, therefore, are valid and unchangeable with respect to their nominal value, whatever kind of money payment may have been made in, unless it appears from the receipts, books, or correspondence on the subject, that it was the will of the parties to accept the said payment as an instalment subject to adjustment.

IV. It is decided that vales [promissory notes] to bearer, issued provisionally by concerns without authority of the Government, but without legal violation and only to cover transitory requirements of legal money in the payment of wages and other immediate demands, may be required to be paid in metallic currency, after being reduced to such currency in accordance with the provisions of Article 10; payment in like manner may be demanded in the liquidation of the so-called bank-to-bank checks, on condition that payment thereof should be demanded of institutions coming under the provisions of the law of payments of April 13, 1918.

V. As regards money obligations emanating from a transaction of purchase and sale, in which the subject of the indebtedness represents the price, neither the reduction nor the equivalences established by Article 10 of the law of payments, are applicable, excepting when both parties agree that such price was fixed in paper money, or when, in the absence of such agreement the courts decide that the price should be considered as in paper money and not as in metallic money. In case of doubt, the amount to be exacted shall be fixed by means of a valuation of the object sold to be made by experts named with judicial intervention in case the parties do not agree to another form.

VI. Under Article 25 and relative articles of the law of payments of April 13, 1918, is included private indebtedness in favor of State treasuries not originating from taxes, but which are in the nature of civil obligations, properly so called, emanating from agreements or contracts made by the said local governments or municipalities with private parties.

VII. Obligations contracted expressly in paper money of the Vera Cruz issue after April 1916 shall not be considered as included for the liquidation thereof in the table of equivalences inserted under Article 10 of the law of payments, inasmuch as the equivalences established in the said table, as from May 1916 inclusive, refer to the relationship between the so-called infalsificable paper and national gold, but not to the Vera Cruz paper issue, which should be considered as having a value of ten to one with respect to the table for the infalsificable.

I communicate the foregoing to you for your information and compliance therewith.


The Undersecretary in Charge of the Department,
R. Nieto
  1. Diario Oficial, Monday, August 26, 1918.