Historical Context of the Treaty:

The Treaty of Guadalupe Hidalgo ended the war between the United States and Mexico, which lasted between 1846 and 1848. In that war, the United States acquired most of what is today the American southwest. This was an obvious result of the U.S. victory. What was not clear was exactly how the provisions of the treaty concerning property ownership would be administered.

American newcomers to California feared fraudulent land claims presumably made by Mexican land-grant holders. One land-grant claim by Jose Limantour to part of the city of San Francisco was proven to be a fraud. Throughout the entire period of translating the old Mexican land holding system to a new American one, suspicion of fraud clouded the proceedings.

A federal act passed in 1851 [California Land Act of 1851] set up a system to adjudicate land grant disputes. This system assumed that no land grant existed unless the claiming party could prove its existence by documentation. Many Californio families had long since misplaced any official documents establishing their claims. English speaking lawyers had to be hired by Californio landholders in carrying such cases before the Land Commission [located in San Francisco].

American land law was very precise, with real estate ownership described in scientific terms by means of surveying instruments. Mexican land law was more artistic, with properties defined as existing south of one group of mountains and north of a river, or west of a wash and east of a heap of cattle bones. Californio landowners had to hire surveyors to translate their holdings into precise measurements.

Californio landowners had to travel to faraway San Francisco to have their case argued by expensive lawyers. All of these things cost money, which they did not have. To raise the necessary funds to defend their claims, they had to sell parts of their holdings to speculators, who got them cheaply because the legal title had not yet been established.

Even if a Californio landowner won his case before the Land Commission [and most did], the size of their holdings had been shrunk to pay attorney fees and other expenses. Also, even after the U.S. government acknowledged the legality of a land grant, the owner then had to deal with often-violent Anglo-American squatters who set up farming illegally on their lands. Gun fights between owners and squatters often left the owner dead.

Additionally, the California legislature deliberately created a tax structure to raise most of its revenue through high real-estate taxes. Its motive in this policy was to break up large estates not being put to productive use.

Treaty of Guadalupe Hidalgo, 1848 [Article VIII]:

Art. VIII. Mexicans now established in territories previously belonging to Mexico, and which remain, for the future, within the limits of the United States, as defined by the present treaty, shall be free to continue where they now reside, or to remove, at any time, to the Mexican republic, retaining the property which they possess in the said territories, or disposing thereof, and removing the proceeds wherever they please, without their being subjected, on this account, to any contribution, or tax, or charge, whatever.
In the said territories, property of every kind, now belonging to Mexicans not established there, shall be inviolably respected. The present owners, the heirs of these, and all Mexicans who may hereafter acquire said property by contract, shall enjoy, with respect to it, guaranties equally ample as if the same belonged to citizens of the United States.

This document was taken from Sucheng Chan and Spencer Olin, eds., MAJOR PROBLEMS IN CALIFORNIA HISTORY [Boston: Houghton Mifflin Co., 1997], 96-97.
Additional Resources:

Full text of the Treaty: http://www.azteca.net/aztec/guadhida.html
The Mexican American War at the San Francisco Museum: http://www.sfmuseum.org/hist6/muzzey.html
Mexican-American War site: http://www.pbs.org/kera/usmexicanwar/

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