Mr. Hay to Mr. Hunter.
Washington, November 4, 1898.
Sir: Mr. R. H. May has filed memorials in the Department showing that under contract with Guatemala, dated April 5 and July 16, 1898, he agreed to operate a railroad in Guatemala for one year for $35,000 per month, and to furnish and place a large number of cross-ties, and to repair and reconstruct parts of the railroad; for all of which, called in the contract “extra work,” the accounts were to be audited by a Government official, and the work inspected as it was done and paid for within the first ten days of the succeeding month; that the railroad was, on the 16th day of April, turned over to Mr. Hay under this contract, with the right of possession for one year, and from that time to the 21st of September he fulfilled his contract to the letter, as shown by the reports of the inspecting engineer made monthly; that his accounts for extra work were duly presented and approved by the directing engineer without a word of complaint till the 21st day of September; that each month the Government fell behind very largely in its payments, and he, May, was compelled to advance $35,000 and to purchase supplies to the extent of $24,000 on credit, and to become indebted to his men $65,000 up to the 31st day of August, in order to continue the operation of the road and prevent a strike; that the Government’s monthly defaults prior to September 1 aggregated $136,000; that he then explained to the Government that he had exhausted his capital and credit, and that the men would strike unless the Government paid enough to settle their wages; that the Government solemly promised repeatedly to do so, but broke all its promises; and on the 21st of September the men struck and in consequence the operation of the road was suspended; that on the 22d of September, May went to Guatemala City, and, having obtained an audience with the President, in your presence, explained the situation and demanded $72,000, then due his men, and necessary to settle the strike; that the President then proposed that he would pay the $72,000 and would promptly audit and pay May’s account for extra work if May would agree to cancel the contract, which May agreed to do; that on October 6 he gave to May $58,000, which was just enough to pay his laborers for July and August, and on the 15th of October the Government paid $17,000, which was just enough to pay the men for September; that as to the accounts for extra work and cross-ties, the Government has never taken any steps to audit them more than had been done prior to September 22, nor has it ever attempted to pay them, though it has had six weeks in which to [Page 649] do so; that, on the contrary, it began after September 22 to question May’s rights in every way; that it notified him that his contract was nullified; that his accounts for June, already accepted and approved, should be reduced $5,000; that his monthly subvention of $35,000 for September should be reduced $8,666.66, that his accounts for extra work should be reduced $4, 100 without specifying on what work or for what month; that it held his commissary supplies in the customs house from July to September 30, because he was unable to pay the duties, though it was all the time largely in arrears to him, and that it freely used its soldiers to coerce him and through them seized his hand cars, engines, and trains and placed them in all of his station houses night and day and had them lined up at the depots to meet his trains; that while the Government claimed from September 22 that May’s contract was rescinded, yet it gave him numerous orders after the date which recognized him as contractor, and after that date May rebuilt a railroad bridge and repaired another, and removed from the track two large slides; that as soon as the $58,000 was paid on October 6, he settled the strike and resumed the operation of the road under the contract and continued to operate it until after October 19; that on October 15 you and Mr. Beaupre came down from Guatemala to the railroad and remained there until the 18th; that you, while there, submitted to May a written agreement to arbitrate his dispute; that this agreement provided that all of May’s accounts for extra work should be reopened and submitted to the arbitrators, though most of them had been long since approved by the Government; that the Government should take his commissary supplies and that it should receive possession of the railroad in four days; and that it should pay no cash, but have thirty, sixty, and ninety days in which to pay for the commissary stores, and also the amount allowed by the arbitrators; that May, you, and the representatives of the Government signed this agreement, but that it was disapproved and rejected by the President, who at the same time submitted another written agreement to arbitrate according to the contract which he thereby recognized; that this proposition of the President expressly provided that the question of reducing May’s pay for September $8,666.66, and his accounts for extra work in October should not be considered by the arbitrators, but that said amount should be disallowed, thus eliminating from the arbitration the two principal items in dispute, and also provided that the Government should have sixty, ninety, and one hundred and twenty days in which to pay this debt to May, and for his $9,000 of commissary supplies paying him no cash at all; that May declined to accede to this proposition, and that soon after your return to Guatemala City the Government dispossessed Mr. Hay of the railroad property by military force.
Upon the facts represented to the Department it appears that the only ground upon which the Government of Guatemala justifies its dispossession of May is that on September 22, 1898, May agreed to rescind the contract; but it is contended on the contrary—
- 1.
- That the auditing and payment of May’s account for extra work, as well as the payment of $78,000, were conditions of rescission.
- 2.
- That there were several conditions of the cancellation which have not been complied with, and that although the Government of Guatemala denies this, there is thus raised a question of fact between May and the Government which it had no right to determine and enforce by military power.
- 3.
- That even if the contract was rescinded, this only gave the Government the right to recover possession by judicial proceedings, in which all the equities of the parties would be protected, and it did not justify the use of force.
- 4.
- That the contract of rescission of September 23 meant that the $72,000 should be paid at once, and that inasmuch as the Government did not pay the first part of the $72,000 till October 16, and that inasmuch as in the meantime May’s condition had materially changed, he having during that time built and repaired two bridges, and removed two slides, and obligated himself for another month’s wages to his men, and supplied them out of his commissary, there was not even a compliance with the condition for the payment of the $72,000, and that therefore May was under no obligation to rescind.
In view of the foregoing facts and contentions, as represented to the Department, it does not seem that the Government of Guatemala was justifiable in forcibly dispossessing May; and if you find the facts to be substantial as above stated, you will promptly bring the matter to the attention of the Guatemalan Government, and make earnest representations to the end that May’s rights be respected and protected. You will instruct Consul-General Beaupre to investigate and report the amount of debt and damages to May sustained by the alleged violation of his rights by the Guatemalan Government, with a view to determining the amount of indemnity to which he may be entitled, if any, and report the same to the Department.
I am, etc.,