The legal status of the Monclova issue
The question relating to the shipment of Monclova notes was whether it contravened President Taft's proclamation, made following the Joint Resolution of 14 March 1912, that banned the export of war material to the feuding parties in Mexico, or any other American regulation.
On 25 August José María Rodríguezformerly Maderista presidente municipal of Torreón, the Constitutionalist consul in San Antonio wrote to Senator Morris Sheppard, in Washington, describing the shipment as “printed blanks for an issue of Constitutional currency”. Rodríguez stated that as printed matter it was not "munitions of war" and did not come under President Taft’s proclamation. Nor did it come under section 171 of the U. S. penal laws, as the notes were not similar to any United States or foreign coins. So the seizure was unlawful and arbitrary and he asked the Senator to submit the matter to the attention of the War Department and Department of Justice to get the matter rectified and the shipment releasedSD papers, 812.5157/9. On the same day the Constitutionalists' lawyers, Hopkins and Hopkins, sent a memorandum likewise arguing that the seizure was unwarranted for the following reasons:
1. the notes were not in the slightest degree similar to any notes issued by the banks of Mexico, and
2. the Joint Resolution of 14 March 1912, and the President’s proclamation thereunder, prohibited the exportation of “arms or munitions of war”. Notes, currency, or securities of any sort could not be classed as either, although under circumstances, such as a blockade, they might be considered as contraband. The law was specific in referring to “arms or munitions of war”. Bouvier described “arms” as “anything that a man wears for his defence”, and the Century Dictionary referred to “munitions” as “materials used in war for defense or for attack”.
The lawyers argued that if the seizure was justifiable, then all remittances from the United States of money or other things of value to agents of the Constitutionalist government would have to be considered as “arms and munitions of war", which according to law they were not; and the lawyers were not aware of a single precedent justifying such a constructionSD papers, 812.5157/6.
For its part the American government reasoned that:
"The Joint Resolution of 14 March 1912 and the President’s proclamation thereunder prohibited the exportation of “arms or munitions of war". The meaning of this phrase was discussed in an opinion of the Attorney-General of 25 March 1912, which concluded, “As a practical working definition for the use of the officials on the border, without embracing all of the items enumerated in the first list adopted at the Conference of London, I suggest the following as embracing all that is within the practical purpose which the joint resolution and the proclamation are intended to accomplish, namely: “articles primarily and ordinarily used for military purposes in time of war, such as weapons of every species …”"
"Accordingly, paper money did not fall within the prohibition, but authority existed for holding that it did constitute contraband of war. In the case of the Bermuda (8 Wallace, 514, 552) it was held by the Supreme Court of the United States in 1865 that printing presses and materials, paper, and Confederate States postage stamps, destined to the Confederate Government were to be treated as contraband. In the case of the United States vs. Diekelman (92 U.S. 520, 526) which was decided in 1875, the same court said: “What is contraband depends upon circumstances. Money and bullion do not necessarily partake of that character, but, when destined for hostile use or to procure hostile supplies, they do. Whether they are so or not, under the circumstances, of a particular case, must be determined by some one when a necessity for action occurs.”"
"From the text of Carranza’s decree authorising the issue there appeared to be no doubt that the paper held at Eagle Pass was intended for hostile use and to obtain hostile supplies. It has been determined by high authority that the making of paper money for use in a foreign country in support of insurrection, actual or intended, against the Government of such country is an unlawful act which may be enjoined in the courts at the suit of the foreign sovereign within whose dominions it is intended that the papers shall be used. This was held by Vice Chancellor Stuart in the case of the Emperor of Austria vs. Day and Kossuth (2 Gifford, 628). In this case the defendants had manufactured a large quantity of printed paper to represent the public paper money of the Kingdom of Hungary in order to use it, when opportunity should occur, for purposes hostile to the sovereign ruling power of that Kingdom. The Vice Chancellor, Sir John Stuart, held that, the laws of nations being part of the common law of England, and money being the medium of commerce, a foreign sovereign at peace with the crown of England might sue in the courts of Chancellery to protect his prerogative right of issuing coin or paper money. An injunction was granted decreeing that the plates from which the printing was done should be delivered up to be destroyed and that the so-called money should be delivered up and cancelled. This judgment was confirmed by the House of Lords on appeal (The Emperor of Austria vs. Day and Kossuth, # De Gex, F. and J., 216). In this case the grounds on which the previous decision was based was somewhat modified. The Lord Chancellor, Lord Campbell, who delivered the first opinion, based his judgment in favor of the plaintiff chiefly on the theory of protecting a property right which would be injured by the attempted use of unauthorized money. It was indicated that the suit might equally have been brought, for example, by a bank in Austria or Hungary whose interest in its circulation might have been injured by the revolutionary notes. This was the view of the Lord Chancellor. Lord Justice Turner, also declared that the plaintiff, as representing his subjects, was entitled to relief on account of the pecuniary injury which a spurious circulation would inflict on them. He doubted whether the plaintiff would have been entitled to relief on the ground of the loss arising to the State from such spurious circulation."
The Department of State argued that in the present state of things there appeared to be no doubt that the Carranza notes were to be regarded as spurious money. "By Article 28 of the Mexican Constitution the right of the Federal Government to coin money has declared to be an “exclusive right.” By Article 111 of the same Constitution the States are expressly forbidden to “coin money, issue paper money, or create stamped paper.” This clause was amended on 1 May 1896, so as to declare that the States have no power “ to coin money, issue paper money, stamps, or stamped paper.” If Carranza be regarded as a civil and military chief in rebellion against his government, the money issued by him in that capacity is spurious; if he be regarded as a Governor of a State, the money is equally unlawful."
In addition, "its circulation is injurious not only to the property interests of Mexicans but also to those of Americans residing in Mexico within the territory controlled by Carranza. Indeed, by Article 5 of Carranza’s decree, it is declared that any person who refuses to receive or circulate any of the bills issued under the decree shall be punished with one months’ imprisonment for the first refusal and six months in case of its repetition. By Article 6 it is further provided that persons who receive the bills at a discount, that is to say for part of the value they represent, shall suffer half of the penalty prescribed in the preceding Article."
"It would seem to follow from what has been set forth that the shipment of the bills to Mexico might be enjoined at the suit of a proper party and the bills themselves decreed to be canceled. The question remains who would be a proper party. Any bank in Mexico would seem to be qualified, That the Mexican Government itself could sue is rendered doubtful solely by the fact that the present Government of Mexico has not been recognized by the United States. Perhaps it would not necessarily follow from this fact that the Government could not maintain suit in the United States, since, although we withhold the formality of diplomatic recognition, we conduct diplomatic correspondence with it and recognize it, for example, in extradition cases, as the representative of law and social order. Perhaps recognition in this sense and to this extent might suffice for the purposes of a suit in such a case as that now under consideration.
"The question may also be suggested whether the Government of the United States could under the Act of 1888 prosecute a suit for an injunction to prevent the shipment of the bills and to secure their cancellationSD papers, 812.5157/8."
The case was referred to the Federal court at Del Rio, with Samuel Belden representing the Constitutionalists. On the advice of the Acting Secretary of State, John Basset Moore, the Department of Justice did not argue that the money were “munitions of war” but, rather, that the United States had an international obligation to prevent its exportation and circulation in Mexico because of the great harm it could causeAIF, memorandum of S. G.Hopkins to Pérez Romero, Constitutionalist agent, Washington, 14 October 1913.
However, the court ordered that the money be turned over to the Constitutionalists. No written opinion seems to have been rendered, but the Department of Justice received a letter from the District Attorney enclosing a copy of the pleadings in the case and the agreed statement of facts. The District Attorney argued as follows:
1st. Upon the ground that the currency was spurious, and to permit its manufacture in the United States and to permit its exportation into the Republic of Mexico, there to circulate as lawful money, would be a wrong done to Mexico and the people thereof, and, therefore, it was the duty of our Government to use due diligence to prevent it, although the act done may not be a violation of any criminal statute of the United States;
2nd. Under the laws governing neutrals, it is our duty to abstain from doing those things or permitting them to be done within our dominion, that can be useful or necessary to either in carrying on the war, or supplying either with anything of direct use in war, or that would enable either to better carry on the war.
In reporting the action of the court, the District Attorney said that Judge Maxey intimated if the Mexican Government was complaining, perhaps there might be some merit in the contentionSD papers, 812.5157/49 letter [ ] W. Davis, Solicitor General to Joseph W. Folk, Solicitor, Department of State.
The Department of Justice declined to appeal the decision, so on 10 January 1914 the military commander handed over the moneySD papers, 812.5157/40.