Marcos-Araneta vs. Court of Appeals

In a personal action with multiple plaintiffs, venue is determined by the residence of the principal plaintiff or real party in interest; nominal parties or representatives, such as trustees, cannot be considered principal parties whose residences can establish proper venue.

Ambassador Roberto S. Benedicto and his business associates organized Far East Managers and Investors, Inc. (FEMII) and Universal Equity Corporation (UEC) in 1968 and 1972, respectively. Petitioner Irene Marcos-Araneta alleged that the shares of stock of these corporations were placed in the names of the Benedicto Group under a trust arrangement whereby 65% of the shares and their fruits were to be held for her benefit. When demands for reconveyance were refused, Irene initiated actions for reconveyance, accounting, and receivership in Batac, Ilocos Norte.

• Trust Arrangement and Original Complaints: Irene Marcos-Araneta alleged that Ambassador Roberto S. Benedicto and his associates held 65% of the shares of FEMII and UEC in trust for her. After demands for reconveyance were refused, she filed two complaints in the RTC of Batac, Ilocos Norte.
• Motion to Dismiss and Residency Issue: Benedicto and his daughter Francisca moved to dismiss the cases on grounds including lack of jurisdiction (intra-corporate dispute), improper venue, and failure to state a cause of action. To support improper venue, they presented a joint affidavit from household staff attesting that Irene did not reside in the Marcos Mansion in Batac but stayed in Makati City. Irene countered with a community tax certificate issued in Ilocos Norte.
• Dismissal for Improper Venue: The RTC dismissed the original complaints on June 29, 2000, ruling that the actions were partly real and that Irene did not actually reside in Ilocos Norte, rendering venue improperly laid.
• Amended Complaint: Pending her motion for reconsideration, Irene filed an amended complaint on July 17, 2000, adding Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin—all residents of Ilocos Norte—as co-plaintiffs designated as her new trustees. The amended complaint sought the reconveyance of the FEMII shares.
• Admission of Amended Complaint: The RTC admitted the amended complaint on October 9, 2000, reasoning that under Section 2 of Rule 10, Irene could amend as a matter of right since no responsive pleading had been filed. The RTC also held that the inclusion of resident co-plaintiffs cured the defect of improper venue.
• CA Reversal: Respondents elevated the issue to the CA via certiorari. The CA nullified the RTC orders and dismissed the amended complaints, ruling that the original complaints had already been dismissed with finality when the amendment was filed, and that venue remained improperly laid.

• Verification and Non-Forum Shopping: Petitioners argued that the CA erred in allowing respondents to submit an affidavit authorizing Francisca to sign the verification and certification of non-forum shopping on behalf of Julita, claiming strict compliance was required.
• Certiorari Jurisdiction: Petitioners maintained that the CA erred in resolving the factual issue of the trust's existence, as Rule 65 certiorari is limited to errors of jurisdiction and cannot delve into evidentiary matters.
• Admission of Amended Complaint: Petitioners contended that the CA erred in ruling that the amended complaint should be dismissed because there was no original complaint to amend, arguing that the dismissal order had not yet become final when the amendment was filed due to a pending motion for reconsideration.
• Waiver of Venue: Petitioners asserted that respondents waived the objection to improper venue by filing numerous pleadings participating in the case.
• Residency and Principal Parties: Petitioners insisted that Irene was a resident of Batac, Ilocos Norte, or alternatively, that her co-plaintiffs were principal parties residing in Ilocos Norte, thereby properly laying venue under Rules 3 and 4.

• Verification and Non-Forum Shopping: Respondents countered that substantial compliance with the verification and certification requirements was sufficient, as they shared a common interest and defense.
• Improper Venue: Respondents argued that the suit was a personal action and venue was improperly laid because Irene was not a resident of Batac, and the added co-plaintiffs were mere trustees, not principal parties.
• Intra-corporate Dispute: Respondents maintained that the cases involved an intra-corporate dispute over which the SEC, not the RTC, had jurisdiction.
• Lack of Cause of Action: Respondents asserted that the complaint failed to state a cause of action because it lacked an allegation that Irene, as beneficiary, had accepted the purported trust.

• Verification and Non-Forum Shopping: Whether the CA correctly allowed substantial compliance with the verification and certification against forum shopping requirements.
• Certiorari Jurisdiction: Whether the CA erred in resolving the factual merits of the trust issue in a Rule 65 petition for certiorari.
• Amendment of Pleadings: Whether the RTC correctly admitted the amended complaint despite the prior dismissal of the original complaints.
• Waiver of Venue: Whether respondents waived the objection to improper venue.
• Venue of Personal Actions: Whether venue was properly laid in Batac, Ilocos Norte, considering the residency of the principal plaintiff and the status of the added co-plaintiffs as representative trustees.

• Verification and Non-Forum Shopping: Substantial compliance was correctly upheld. Verification is a formal, not jurisdictional, requirement. The signature of a principal petitioner constitutes substantial compliance with the certification against forum shopping, particularly where the parties share a common interest and filed the case as a collective.
• Certiorari Jurisdiction: The CA overstepped its jurisdiction by resolving the factual issue of the trust's existence and enforceability. A special civil action for certiorari is confined to correcting errors of jurisdiction; it cannot resolve evidentiary matters such as whether the trust was express or implied.
• Amendment of Pleadings: The admission of the amended complaint was proper. Under Section 2, Rule 10, a plaintiff may amend a pleading once as a matter of right before a responsive pleading is served. A motion to dismiss is not a responsive pleading. Furthermore, the original dismissal order had not become final when the amendment was filed because a motion for reconsideration was pending.
• Waiver of Venue: Venue was not waived. Objections to improper venue must be raised seasonably, within the time for but before filing the answer. Respondents raised the objection in their motion to dismiss and reiterated it in their answer and certiorari petition, fulfilling the requirement.
• Venue of Personal Actions: Venue was improperly laid. The action is in personam, seeking to compel recognition of a trust over shares of stock, not an in rem action against corporate real properties. Under Section 2, Rule 4, venue in personal actions is determined by the residence of the principal plaintiffs. Irene is the real party in interest and principal plaintiff, and the RTC found she was not a Batac resident. Her co-plaintiffs, being mere trustees representing her under Rule 3, are not principal parties whose residences can anchor venue. Adding nominal parties cannot circumvent venue rules.

• Amendment as a Matter of Right — A party may amend a pleading once as a matter of right at any time before a responsive pleading is served. A motion to dismiss is not a responsive pleading. The trial court's duty to admit such an amendment is purely ministerial.
• Substantial Compliance with Verification and Certification Against Forum Shopping — Verification is a formal requirement intended to ensure good faith, not a jurisdictional requisite. The signature of any principal petitioner on the certification against forum shopping constitutes substantial compliance, especially when the petitioners share a common interest and act as a collective.
• Venue Based on Residence of Principal Parties — In personal actions with multiple plaintiffs, venue is determined by the residence of the principal plaintiffs. The term "principal" prevents a plaintiff from establishing venue through the residence of a nominal or formal party. A representative trustee is not a principal party; the real party in interest (the beneficiary) is.

• "Eliminate the qualifying term 'principal' and the purpose of the Rule would... be defeated where a nominal or formal party is impleaded in the action since the latter would not have the degree of interest in the subject of the action which would warrant and entail the desirably active participation expected of litigants in a case."
• "As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the right to prosecute a suit, but only on behalf of the beneficiary who must be included in the title of the case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of Irene's co-plaintiffs cannot be made the basis in determining the venue of the subject suit."

• Alpine Lending Investors v. Corpuz — Followed. A motion to dismiss is not a responsive pleading; thus, the plaintiff has the right to amend the complaint as a matter of right, and the trial court has a ministerial duty to admit it.
• Cavile v. Heirs of Clarita Cavile — Followed. Where parties file a case as a collective with a common interest and single defense, the signature of one petitioner on the certification against forum shopping constitutes substantial compliance.
• Kimberly Independent Labor Union (KILUSAN)-OLALIA v. Court of Appeals — Followed. Verification is a formal, not jurisdictional, requirement, and courts may order correction or dispense with strict compliance to serve the ends of justice.

• Section 2, Rule 10, Rules of Court — Governs amendments as a matter of right. Applied to hold that the RTC correctly admitted the amended complaint because no responsive pleading had been served.
• Sections 2 and 3, Rule 3, Rules of Court — Defines real parties in interest and representatives as parties. Applied to determine that Irene was the real party in interest and her co-plaintiffs were mere representatives (trustees), not principal parties.
• Section 2, Rule 4, Rules of Court — Governs the venue of personal actions. Applied to rule that venue is proper where the principal plaintiff resides; because the principal plaintiff was not a resident of Batac, venue was improperly laid.
• Sections 4 and 5, Rule 7, Rules of Court — Governs verification and certification against forum shopping. Applied to uphold the appellate court's acceptance of substantial compliance.

Leonardo A. Quisumbing (Chairperson), Conchita Carpio Morales, Dante O. Tinga, Arturo D. Brion