o As a security for compliance of its undertaking with respondents, MSI as the investment agent of the respondents, delivered the qualified securities to the IBAA. As a result of this transaction, MSI and IBAA executed a custodianship agreement in which the latter was constituted as a custodian bank of the investment portfolio of securities of the respondents. o The agreement also provided that in case of default by the investment agent, IBAA, as its attorney-in- fact, was authorized to sell so much of the qualified securities held in the portfolio and to apply the proceeds thereof. However, by reason of a “Substitution of Trustee with Assumption of Liabilities”, LBP as trustee succeeded IBAA as a custodian bank and thus assumed the previous duties and responsibilities of the latter. o However, the President of MSI filed a petition with the SEC for MSI’s rehabilitation and the appointment of a Management Committee for the said corporation to “avoid an imminent danger of paralyzation of its business operations brought about by serious financial problems”. The company was later put under rehabilitation and a Management Committee was later on appointed. In a letter, MSI informed LBP that it had been placed under rehabilitation and the SEC had appointed a Management Committee to handle its affairs. o MSI directed LBP to suspend any movement, disposition, or substitution of any and all properties they hold as per the directive of the SEC. o This did not sit well with the respondents. They wrote LBP requesting the latter to return their investment with MSI. o The LBP referred the letter to the Management Committee which rejected the demands of the respondents. o LBP informed the respondents that it could not heed their requests. o The respondents replied by saying that LBP, as a trustee of their investment portfolio, held legal title over the same. As such, said portfolio could not be affected by any directives of the Management Committee. It offered for LBP to sell and dispose of the securities and apply the proceeds to the satisfaction of their claims instead of handing them over to the Management Committee. LBP rejected the said demands because it was only a mere custodian of the securities which meant that it did not have legal title over the same. Respondents filed a petition with the RTC seeking the removal of the IBAA. IBAA nad LBP moved to dismiss the petition on the ground that it was the SEC, and not the RTC which had jurisdiction over the subject matter of the case.
25 Rule 64 & 65 RTC: IN FAVOR OF LBP o SEC had primary jurisdiction to the exclusion of the RTC; and o The matter of determining whether the agreement was one of agency, bailment, or trust, should be raised in and determined by the SEC first.
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- Fall '19
- Supreme Court of the United States, The Court, COMELEC