Pioneer Insurance and Surety Corporation vs. De Dios Transportation Co., Inc. and De Dios Marikina Transit Corporation

A notice of withdrawal of appeal filed by newly substituted counsel without the written conformity of the appellant is a mere scrap of paper that does not render the trial court's decision final and executory.

Respondents De Dios Transportation Co., Inc. (DDTC) and De Dios Marikina Transit Corporation (DMTC) sold fifty-eight buses and their franchises to Willy Choa Coyukiat and/or Goldfinger Transport Corporation (Goldfinger) via a Deed of Conditional Sale for P12,000,000. After delivery and partial payment, the vendees stopped payment on the postdated checks covering the balance, alleging the buses were defective and the franchises unutilizable contrary to the vendors' warranties. The vendees subsequently filed a complaint for rescission of contract and obtained a writ of preliminary injunction, enjoining the respondents from encashing the postdated checks, supported by an P11,000,000 injunction bond issued by petitioner Pioneer Insurance and Surety Corporation.

• The Conditional Sale: Respondents DDTC and DMTC, as vendors, executed a Deed of Conditional Sale in favor of Coyukiat and Goldfinger, covering fifty-eight buses and their franchises for P12,000,000. The vendors guaranteed the franchises were valid and utilizable, requiring only registration with the LTO.
• The Dispute: After delivery of the buses and encashment of the downpayment check, the vendees stopped payment on the eleven postdated checks for the balance. The vendees claimed the buses were not in good running condition, the colors had been changed without permits, and the Buendia-Ayala-UP route could not be operated despite the vendors' representations.
• The Injunction: The vendees filed a complaint for rescission and obtained a temporary restraining order and a writ of preliminary injunction, preventing the respondents from encashing the postdated checks. To secure the injunction, the vendees posted an P11,000,000 bond issued by petitioner Pioneer Insurance.
• The RTC Decision: The RTC dismissed the vendees' complaint for failure to prosecute and granted the respondents' counterclaims, awarding P11,000,000 as unpaid balance, P12,000,000 as liquidated damages, moral and exemplary damages, and attorney's fees.
• The Withdrawal of Appeal: The vendees appealed to the CA. While the appeal was pending, new counsel entered an appearance and filed a notice of withdrawal of appeal without the written conformity of the appellants. The following day, respondents filed a motion to execute against the injunction bond. The CA eventually required the appellants to submit their conformity to the withdrawal, which they did on September 28, 1999.
• The Motion to Execute: The CA dismissed the appeal and referred the motion to execute against the bond to the RTC. The RTC denied the motion, citing the finality of its decision and the impossibility of reopening the case to receive evidence. The CA reversed the RTC in a certiorari proceeding, prompting Pioneer Insurance to elevate the matter to the Supreme Court.

• Jurisdiction: Petitioner argued that the CA lost jurisdiction over the case upon the filing of the notice of withdrawal of appeal on September 14, 1999, which was a matter of right under Section 3, Rule 50 of the Rules of Court because no appellee's brief had been filed.
• Timeliness of Application: Petitioner maintained that respondents failed to file an application for damages against the injunction bond during the trial of the main case and filed it only after the RTC decision had become final and executory.
• Absence of Award Under Bond: Petitioner contended that the RTC judgment did not include an award for damages arising from the issuance of the writ of preliminary injunction, and the respondents' victory on their counterclaim did not automatically entitle them to damages under the bond.
• Causation: Petitioner asserted that the damages sustained by respondents were not caused by the issuance of the writ of preliminary injunction.

• Validity of Withdrawal: Respondents countered that the withdrawal of appeal filed by new counsel without the appellants' written conformity was a mere scrap of paper. Substitution of counsel requires the client's written consent; absent such conformity, the counsel of record remained the attorney of record.
• Jurisdiction: Respondents argued that the appeal was deemed withdrawn only upon the appellants' submission of their conformity on September 28, 1999. Because the motion to execute against the bond was filed on September 15, 1999, the CA retained jurisdiction over the case.

• Validity of Withdrawal of Appeal: Whether the notice of withdrawal of appeal filed by newly substituted counsel without the appellant's conformity effectively rendered the trial court's decision final and executory.
• Jurisdiction over Motion to Execute: Whether the Court of Appeals retained jurisdiction to entertain the motion to execute against the injunction bond filed before the appeal was validly withdrawn.
• Entitlement to Damages under Bond: Whether the respondents are entitled to execute against the injunction bond, and whether the RTC should receive evidence to determine such entitlement.

• Validity of Withdrawal of Appeal: The notice of withdrawal was a mere scrap of paper. Substitution of counsel requires strict compliance with essential requisites, including the written consent of the client and the attorney to be substituted. Without valid substitution, the new counsel had no authority to withdraw the appeal. Furthermore, withdrawing a perfected appeal is an act beyond the general authority of counsel, requiring a special power of attorney or the client's written conformity.
• Jurisdiction over Motion to Execute: The CA retained jurisdiction. The appeal was effectively withdrawn only upon the appellants' submission of their conformity on September 28, 1999, which was after the respondents filed their motion to execute on September 15, 1999. The subsequent conformity cannot be given retroactive effect to prejudice the respondents' right to execute against the bond, especially where the withdrawal appeared calculated to frustrate the satisfaction of the judgment debt.
• Entitlement to Damages under Bond: The RTC must resolve the motion on the merits after receiving evidence. The RTC erred in denying the motion solely on jurisdictional grounds. By analogy with Section 20, Rule 57 of the Rules of Court, an application for damages against an injunction bond requires a hearing with notice to the surety to determine the reality and reasonableness of the damages resulting from the wrongful issuance of the writ.

• Substitution of Counsel — No substitution of counsel is allowed unless the following essential requisites concur: (1) a written request for substitution; (2) written consent of the client; (3) written consent of the attorney to be substituted; and (4) if the attorney's consent cannot be obtained, proof of service of notice of the motion upon the attorney to be substituted. Absent compliance, substitution is ineffective, and the original counsel remains the attorney of record responsible for the conduct of the case.
• Authority of Counsel to Withdraw Appeal — Counsel is a mere agent holding a special power of attorney to act for the principal respecting the ordinary course of the appealed case. Withdrawal of a perfected appeal requires a special power of attorney expressly authorizing such withdrawal, or the written conformity of the appellant; otherwise, the notice of withdrawal is a mere scrap of paper.
• Application for Damages Against Injunction Bond — By analogy with Section 20, Rule 57 regarding attachment bonds, an application for damages against an injunction bond must be filed in the same case, before the entry of judgment, and after a hearing with notice to the surety. The surety must be given an opportunity to be heard regarding the reality and reasonableness of the damages resulting from the wrongful issuance of the writ.

• "No substitution of counsel of record is allowed unless the following essential requisites of a valid substitution of counsel concur: (1) there must be a written request for substitution; (2) it must be filed with the written consent of the client; (3) it must be with the written consent of the attorney to be substituted; and (4) in case the consent of the attorney to be substituted cannot be obtained, there must be at least a proof of notice that the motion for substitution was served on him in the manner prescribed by the Rules of Court."
• "Absent a special power of attorney expressly authorizing their counsel to withdraw their appeal, or in lieu thereof, the written conformity of the appellants to the withdrawal of their appeal, the notice of withdrawal of appeal by the new counsel of the appellants was a mere scrap of paper."

• Santana-Cruz v. Court of Appeals, 361 SCRA 520 (2001) — Followed for the enumeration of the essential requisites of a valid substitution of counsel.
• International Container Terminal Services, Inc. v. Court of Appeals, 214 SCRA 456 (1992) — Followed for the rule that Section 20, Rule 57 of the Rules of Court regarding application against attachment bonds applies by analogy to injunction bonds, requiring due notice to the surety.
• Ponce Enrile v. Capulong, 185 SCRA 504 (1990) — Followed for the rule that the application for damages against an injunction bond must be filed before the entry of judgment.
• Lim Pin v. Liao Tan, 115 SCRA 290 (1982) — Followed for the principle that withdrawing an appeal requires a special power of attorney or the client's written conformity.

• Section 3, Rule 50 of the Rules of Court — Provides that an appeal may be withdrawn as a matter of right at any time before the filing of the appellee's brief. Applied to determine that while withdrawal is a right, the notice filed without client conformity was ineffective and not self-executory.
• Section 20, Rule 57 of the Rules of Court — Governs the application for damages against an attachment bond. Applied by analogy to injunction bonds to mandate that the surety must be given notice and an opportunity to be heard on the reality and reasonableness of damages.

Bellosillo, Austria-Martinez, and Tinga.