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SLADE v. UNITED STATES OF MEXICO

July 8, 1985

EDWIN SLADE, Plaintiff
v.
THE UNITED STATES OF MEXICO, Defendant



The opinion of the court was delivered by: GREENE

 Plaintiff, pro se, filed this action against the United States of Mexico to recover $472,123, the purported face value of certain "Receipts for Interest in Arrears" which he alleges were issued by the Mexican government pursuant to certain agreements made in 1922. *fn1" This action was originally filed in the United States District Court for the District of Nevada. *fn2" On October 28, 1981, that court dismissed plaintiff's complaint for lack of personal jurisdiction over the defendant. Plaintiff appealed and the Ninth Circuit, in an unpublished opinion, 730 F.2d 769, affirmed the court's finding that it lacked personal jurisdiction, but it nevertheless vacated the lower court's order of dismissal with instructions to transfer the matter pursuant to 28 U.S.C. § 1406(a). *fn3" In accordance with plaintiff's request, the District Court in Nevada transferred the action to this Court on April 30, 1984. Currently pending are the parties' cross-motions for summary judgment. *fn4"

 In order to understand better the jurisdictional issues raised by Mexico, the background of the agreements under which plaintiff's receipts were issued and the amendments to those agreements will be summarized.

 I

 From 1886 to 1910, during the so-called "Diaz regime," Mexico was engaged in extensive construction projects. In order to finance such projects, the government of Mexico as well as certain municipalities and privately-owned railroads issued bonds and various other debt instruments totalling over $500 million. These bonds were sold world-wide by banking houses in the United States and Europe. The government of Mexico continued to make payments on these debts until 1914, when civil unrest broke out in that country.

 After the Mexican government ceased making payments, a number of banking houses, many of which had sold bonds to the public, joined together and formed a committee -- i.e., the International Committee of Bankers (the Committee) -- to negotiate with the Mexican government for the resumption of payment on the bonds. *fn5" After several years of negotiation, an agreement was finally reached between the Finance Minister of Mexico and the Committee. *fn6" This agreement, the "Plan and Agreement of June 16, 1922," was intended to restore certain specified obligations, both private and public, and to provide for the discharge of such obligations on a limited and deferred basis by the Mexican government in accordance with its ability to pay.

 Among other things, the Plan provided that,

 
1. ARREARS OF INTEREST
 
The payment in cash of all interest due and payable on or before January 2, 1923, on both the Government and the railway obligations, is to be waived by the bondholders.
 
The payment of interest upon all arrears of interest due and payable on or before January 2, 1923, on both the government and railway obligations is to be waived by the bondholders.

 Notwithstanding these provisions, the Plan provided that the government of Mexico would set aside during a 40 year period -- i.e., from 1928 to 1968 -- sums sufficient to retire the unpaid interest. Holders of coupons for such unpaid interest were required to deposit their coupons with a trustee designated by the Committee who, in exchange for the coupons, would issue receipts for the face amount of the coupons -- the same "Receipts for Interest in Arrears" upon which plaintiff sues. In accordance with the Plan, the receipts were to be issued not by the government of Mexico, but by the Committee. The Plan provided, however, that if the Plan was not, for any reason, fully carried out during the next five years, the bondholders would "resume all their contractual rights."

 Upon adoption of this Plan, the Committee drafted a second agreement -- the Deposit Agreement of July 1, 1922. This agreement set forth the rights of the holders of coupons for interest in arrears who deposited their coupons with the Committee. By its terms, the Deposit Agreement was "between such holders of the bonds . . . and of the coupons or other evidences of indebtedness for or rights to unpaid interest . . . as shall become parties to this agreement in the manner herein after provided . . . and International Committee of Bankers of Mexico. . . ." The Deposit Agreement also stated that, in the event that the Mexican government defaulted, the holders could recover their deposited coupons or the assignment of rights to interest represented by the receipts from Guaranty Trust Company of New York. Approximately 98% of all the creditors holding bonds and interest coupons covered by the Plan deposited them with the Committee.

 Because of continued civil unrest and economic troubles in Mexico, the Mexican government was unable to carry out the 1922 Plan as it had agreed. The Committee and the Finance Minister for Mexico again entered into negotiations and on October 23, 1925 agreed to a supplemental or modified plan -- the "1925 Modification." *fn7" One of the purposes of the 1925 Modification was to limit the Government's liability, obliging it to repay only those amounts it could realistically afford. The 1925 Modification differed from the 1922 Agreement in that it distinguished the direct debts of the central government and political subdivisions, on the one hand, from the debts of the railways on the other. With respect to interest on arrears, the 1925 Modification provided that the government would discharge the direct debt and the railways would discharge their own debt. *fn8"

 Between 1923 and 1928, the Mexican government and the railways paid the Committee in excess of $45 million to purchase and redeem the outstanding debts covered by the 1922 Plan and 1925 Modification. In 1928, however, the Mexican government again ceased making payments because of the social and economic conditions in the country. Although the Committee tried to work out another agreement with the Mexican government, it was unable to do ...


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