G.R. No. L-8418
December 9, 1915
L.O. HIBBERD, plaintiff-appellant, vs. WM. J. ROHDE and D.J. MCMILLIAN, defendants-appellees.

FACTS:
Plaintiff L.O. Hibberd sued defendants William J. Rohde and D.J. McMillian on a promissory note for P1,200. Only defendant Rohde appeared and answered, raising the special defense of illegality of consideration. Rohde did not file a verified specific denial of the genuineness and due execution of the note. The plaintiff argued that under Section 103 of the Code of Civil Procedure, the defendant’s failure to deny the note under oath barred the defense of illegality of consideration. The trial court found the consideration illegal and ruled in favor of the defendant. The plaintiff appealed.

The evidence showed that the note was executed in connection with a criminal complaint for estafa filed by the firm Brand & Hibberd (to which Hibberd belonged) against McMillian. Rohde, an attorney defending McMillian, signed the note as a co-maker upon the agreement that Brand & Hibberd would move to dismiss the estafa complaint. Rohde testified he signed to secure his sick client’s release from jail, believing the criminal charge was baseless. After the note was executed, the complainants moved for dismissal, which the justice of the peace granted, stating the matter was civil, not criminal. Rohde later made partial payments on the note.

ISSUE:
1. Whether the defendant’s failure to file a verified denial of the genuineness and due execution of the promissory note under Section 103 of the Code of Civil Procedure bars the defense of illegality of consideration.
2. Whether the consideration for the promissory note was illegal as a compromise of a criminal offense, contravening public policy.

RULING:
1. No, the defense of illegality of consideration is not barred by the failure to file a verified denial under Section 103. The Court held that an admission of genuineness and due execution under Section 103 merely establishes a prima facie case for the plaintiff but does not preclude the defendant from raising defenses based on “new matter,” such as illegality of consideration, payment, or fraud. Such defenses are expressly permitted under Section 94 and Section 285 of the Code of Civil Procedure. The admission covers only the authenticity of the signature, the instrument’s form, and its delivery, but does not extend to the validity or legality of the consideration.

2. No, the consideration was not illegal. The Court examined the facts and found no agreement to suppress evidence, conceal a public offense, or stifle a criminal prosecution in a manner contrary to public policy. The complainants merely moved to dismiss the estafa complaint after a preliminary hearing had already taken place, and the justice of the peace independently concluded the case was civil in nature. There was no showing that the complainants agreed to actively interfere with the criminal justice process (e.g., by refusing to testify or suppressing evidence). The primary purpose of the agreement was to settle a civil debt, not to obstruct justice. Therefore, the consideration was not illegal.

DISPOSITIVE PORTION:
The judgment of the trial court is reversed. Judgment is rendered in favor of plaintiff L.O. Hibberd against defendant William J. Rohde for the unpaid balance of P1,000 on the promissory note, with legal interest from the date of the filing of the complaint. No costs.