O as a security for compliance of its undertaking

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.