REPORT OF JACKSON H. RALSTON, AGENT OF THE UNITED STATES AND OF COUNSEL, IN THE MATTER OF THE PIOUS FUND CASE.

Hon. JOHN HAY,

WASHINGTON, D. C., November 10, 1902.

Secretary of State of the United States, Washington, D. C. SIR: I have the honor to submit the following report as agent of the United States in the matter of the claim of the Pious Fund of the Californias, submitted to arbitration by the United States and the Republic of Mexico under the terms of the protocol between the Hon. John Hay, Secretary of State of the United States, and Señor Don Manuel de Azpiroz, ambassador extraordinary and plenipotentiary to the United States of America for the Republic of Mexico, concluded at Washington on May 22, 1902, and ratified by the Mexican Senate May 30, 1902.

Before entering into an account of my own duties in connection therewith, it may be proper to recall some of the circumstances attending the claim in question.

As early as the year 1697 certain members of the Order of Jesus, with the permission of the King of Spain and upon the condition that they should not have power to draw against or from the royal revenues for such purpose, undertook the conversion of the Indians of the Californias, and to effect this end collected considerable sums of money and entered upon their work. From time to time large contributions were made to assist the development of the missions established or designed to be established by them or by their successors, the total of such contributions down to the year 1731 reaching $120,000. In 1735 properties valued at about $400,000 were deeded for the same purpose, and in 1747 an additional contribution, finally amounting to the sum of $120,000, was made. Later, and about the year 1784, some $400,000 reached the fund from another source.

These moneys, to which were added various smaller contributions from time to time from other sources, constituted what became known as "the Pious Fund of the Californias," which, during the earlier portion of its existence, was entirely managed and controlled by the Order of Jesus. Later, and upon the expulsion of that order from the dominions of the King of Spain, that Monarch acted as trustee, delivering the charge of the missions of Upper California to the Franciscans, and of Lower California to the Dominicans. When Mexico threw off her allegiance to Spain, the Mexican Government, through a junta, managed the fund for the pious uses intended by the founders. On September 19, 1836, Mexico enacted a law looking toward the establishment of a bishopric for the two Californias, and providing that the person selected therefor should receive from the public revenues

$6,000 per annum, with certain additional allowances, and further providing that the property belonging to the Pious Fund of the Californias shall be placed at the disposal of the new bishop and his successors, to be by them managed and employed for its objects or other similar ones, always respecting the wishes of the founders of the fund." The Mexican legation to the Holy See, on April 6, 1840, notified the Papacy that "the Mexican Government had taken all proper measures so that the new prelate may not lack a decent income, which is necessary to sustain the expenses and respect and the dignity of a bishop, and in addition, according to a decree of Congress, the Pious Fund destined for the support of missions in the Californias is to be placed at his disposal.”

Immediately after receiving this notification, and in consequence thereof, on April 27, 1840, the bishopric of the Californias was created, and Francisco Garcia Diego, last president of the missions. appointed thereto, he assuming his office in the latter part of the year. On February 8, 1842, by decree of that date, the Mexican Government repealed the law of September 19, 1836, placing the management of the Pious Fund in the hands of the bishop of the diocese, and reassumed its direction, as the decree said, "for the purpose of carrying out the intention of the donors in the civilization and conversion of the savages.

On October 24 of the same year a further decree was passed, formally incorporating the properties of the Pious Fund into the national treasury, and directing the sale of the real estate and other property for the capital represented by their annual product at 6 per cent per annum, and acknowledging an indebtedness of 6 per cent per annum on the total proceeds of the sale, at the same time pledging the revenue from tobacco to the payment of the income corresponding to the capi

tal of said fund.

After the purchase of Upper California by the United States from Mexico in 1848, Mexico failed to pay any part of the income to the proper recipients in Upper California, and as a consequence, upon the formation of the mixed commission, under the treaty of 1868, to adjust claims of citizens of the United States or of Mexico against the other Government, the archbishop of San Francisco, and the bishops of Monterey and Grass Valley, through the American agent, presented their claim against the Republic of Mexico for a proper portion of the income of said fund, bringing it to the attention of the mixed commission on March 30, 1870, a formal memorial being filed December 31, 1870. A large amount of evidence was filed with the memorial, and Mr. Cushing, on behalf of Mexico, on April 24, 1871, filed a motion to dis miss for the reasons shown in the Transcript on page 67. After full consideration of this motion and of all the evidence adduced on behalf either of the United States or Mexico, the American arbitrator (Transcript, p. 523 et seq.) found in favor of the claimants for $904,700.99, and the Mexican arbitrator for the defendant Government (Transcript, p. 527 et seq.).

Because of this difference of opinion, the case was submitted to the umpire, Sir Edward Thornton, who, on November 11, 1875, awarded against Mexico and in favor of the claimants the sum of $904,700.99 in Mexican gold, being twenty-one years' interest at the rate of $43,080.99 per year; or, in other words, 6 per cent upon one-half of the capitalized value of the Pious Fund, it being considered by him that the proper

apportionment of interest in the fund itself between Upper and Lower California would be one-half to each (Transcript, p. 606). Attention being called to an error in computation, this sum total was, by the further order of the umpire, reduced to $904,070.99 (Transcript, p. 650). This award was duly paid by Mexico, although the Mexican secretary of foreign affairs, by a letter, on pages 77 and 78 of the Diplomatic Correspondence, said that "though the final award in the case only refers to interest accrued in a fixed period, said claim should be considered as finally settled in toto, and any other fresh claim in regard to the capital of said fund or its interest, accrued or to accrue, as forever inadmissible." This position Secretary Fish (Diplomatic Correspondence, p. 79) declined to entertain. Mexico, on January 20, 1890, made its last payment on account of the Pious Fund award, and shortly thereafter, and on August 3, 1891, Hon. William F. Wharton, as Acting Secretary of State, took up the matter of the claim for interest which had accrued since 1869 (Diplomatic Correspondence, p. 23); the same subject being renewed by later Secretaries of State, including Hon. James G. Blaine, Hon. John W. Foster, Hon. Walter Q. Gresham, Hon. John Sherman, Hon. W. R. Day, and, finally, by yourself.

As the immediate result of the work performed under your direction, the protocol of May 22, 1902, was entered into with Mexico (Session Statutes, Fifty-seventh Congress, first session, Treaties, p. 142), providing for the reference to a tribunal, to be constituted in general conformity with the provisions of the Hague Peace Convention, of the dispute between the two countries, such tribunal having the power to determine:

"1. If said claim, as a consequence of the former decision, is within the governing principle of res judicata, and

2. If not, whether the same be just;

"And to render such judgment and award as may be meet and proper under all the circumstances of the case."

Pursuant to the terms of this protocol, the United States served upon Mexico on July 3, 1902, a copy of the memorial, setting forth "the origin and amount of their claim," and on August 12, 1902, Mexico delivered to the Department of State of the United States "a statement of its allegations and grounds of opposition to said claim." Meanwhile the United States had prepared and printed a copy of the proceedings had before the Mixed Commission of 1868, the work above referred to, on behalf of the United States, having been performed under my direction, pursuant to appointment by you as agent in the case under date of May 26, 1902.

Following the terms of the protocol, the United States selected as its nominees for the special tribunal to determine the matter in controversy, Prof. F. de Martens, of Russia, member of the Permanent Court of Arbitration, and the Right Hon. Sir Edward Fry, of England, likewise member of said court, while on behalf of Mexico there were named Mr. T. M. C. Asser and Jonkheer A. F. de Savornin Lohman, both of Holland, likewise members of said court, Mr. Asser taking the place of Sig. Guarnaschelli, of Italy, who has declined the position. The four gentlemen so named met at the hotel of the Permanent Court of Arbitration on Monday, September 1, 1902, for the selection of the fifth, who, under the terms of The Hague Peace Convention, was entitled to act as president, and their choice fell upon Prof. Henning Matzen, of Copenhagen, member of the Permanent Court of Arbitra

tion. Professor Matzen accepted the duties imposed upon him, and the court opened its first formal session at The Hague on Monday, September 15, 1902.

The judges upon assembling were greeted in their private chamber by Baron van Lynden, president of the administrative council of the court, and after the exchange of felicitations, the court was formally opened, the address of the president made at that time being replied to by myself, as agent on the part of the United States, and Señor Don Emilio Pardo, as agent on behalf of the Mexican Republic.

His Excellency L. H. Ruyssenaers, secretary-general of the court, was appointed secretary, and to assist him Mr. Walter S. Penfield and Mr. Luis Pardo acted, respectively, as the American and Mexican secretaries.

The sessions for the hearing of arguments extended over ten days, occurring on September 15, 17, 22, 23, 24, 26, 27, 29, 30, and October 1, on which latter date the discussions were closed, the decision being finally given at a meeting on October 14, 1902.

In matters of formal precedence, the preference was given to the United States, the idea being to place the national representatives according to the alphabetical order indicated by the names of their respective countries, and "Etats-Unis d'Amérique" preceding “EtatsUnis Mexicains."

The official language of the court was French, but as all of the arbitrators were familiar with both French and English, the right was extended to the representatives of the United States to address the court in English.

The discussion was opened by Senator William M. Stewart, of Nevada, who considered very fully and clearly the facts of the case, making some incidental observations with relation to the law applicable thereto. He was followed by Mr. Garret W. McEnerney, who analyzed thoroughly the facts surrounding the creation and growth of the Pious Fund and the action of Mexico and Spain with relation thereto, discussing somewhat as well the subject of res judicata. As American agent and as of counsel, I followed Mr. McEnerney, devoting myself to the questions of law arising in connection with the American contentions upon the subject of res judicata and also the application of that theory to arbitral awards. M. Delacroix, of Belgium, of counsel for Mexico, followed with a lengthy analysis of the facts from the Mexican standpoint, and in turn was succeeded by M. Beernaert, who discussed the subject of res judicata, the Mexican opening being concluded by Señor Don Emilio Pardo, the Mexican agent. In reply for the United States, M. Descamps, of Belgium, presented his views with reference to the subject of res judicata or chose jugée as understood by the civil law, and the case of the United States was concluded by Judge William L. Penfield, Solicitor of the Department of State, who summed it up largely from an international standpoint. Under the rules of practice established by the court, the right to conclude was given to the defendant, and MM. Delacroix and Beernaert closed the case with discussions in the line of their original contention.

Upon the conclusion of the arguments on October 1, an adjournment was had for consideration and preparation of the opinion, the court reassembling, after notice to the parties, on October 14, as indicated, to deliver its judgment, at which time there were present

the representatives of the United States and Mexico, and as well a very large number of the members of the Permanent Administrative Council and others at The Hague interested in international affairs.

It is a source of gratification to me to be able to state that all of the leading contentions indulged in on behalf of the United States were unanimously sustained by the tribunal. In the first argument submitted by the American agent it had been maintained, among other things, that the amount of the proper judgment in this case was fixed by the terms of the former award;" that an arbitral court had "inherent power to pass upon its own jurisdiction," and particularly was this true as to the Mixed Commission of 1868; that an arbitral decision, more especially the decision of a Mixed Commission, was entitled to be given the effect of res judicata as to the matters passed upon by it as fully as the judgments of courts established by a State, and that the former award was to be looked at in its entirety in order to determine as to what it was res judicata. All of these positions, important in themselves and important as bearing upon the future history of international arbitrations, received the fullest indorsement. In addition to supporting the above propositions, all the counsel for the United States contended that the Pious Fund controversy was eminently international in character, and that national laws of prescription could not be invoked to defeat such a claim as ours, presented before an international body. These positions also received the explicit sanction of the tribunal. The only point upon which the United States could be considered as having failed of success was as to the currency in which the award ought to be paid, the tribunal declaring that payment should be made in the legal currency of Mexico, and as to its direction that payment be made in gold, the award of Sir Edwin Thornton was not to be considered as res judicata, except with relation to the years embraced within its terms, payment in gold relating to the execution of the award, and not to the foundation of the right in controversy. We had believed that there were many equitable considerations, such as long delay in the payment made by Mexico, the gradual fall in the price of silver during the time, the fact that gold had remained constant in value, and the property originally taken was valued in gold, even at less than its true value, etc., which would have justified a different view, but we accepted cheerfully the findings of the tribunal. The award was highly satisfactory, in that it directed. perpetual payment of the yearly annuity, thus by its express language settling forever the controversy.

As a matter of convenience, I attach immediately to this report an English translation of the award.

By the terms of the protocol a period of eight days was allowed within which revision could be asked, but inasmuch as by the further provision of The Hague Convention such revision could only be demanded on the ground of "the discovery of some new fact calculated to exercise a decisive influence on the award, and which at the time the discussion was closed was unknown to the tribunal and to the party demanding the revision," no appeal therefor was possible, the case having been decided upon a proposition of law, and none was sought.

All matters submitted by the United States to the Permanent Court of Arbitration were presented in print, a method which facilitated and