Legal Question in Securities Law in California

Re: Is possession 9/10ths of the law concerning stock certificate?

"Possession is 9/10ths of the law" is a largely inaccurate and misleading catchphrase that is more often heard on playgrounds than in court. The main truth it expresses is that there may be, in most cases, a legal presumption that the person in possession of a thing is entitled to possess it, and one who would dispossess him of it must bear the burden of proof re his right of possession.

A stock certificate, however, is not ordinary property. It is a legally-significant instrument that evidences ownership of shares of stock. The certificate itself is not the stock; the stock is an intangible and therefore is not capable of "possession" in the ordinary sense.

Further, a properly made-out stock certificate will always have the stockholder's name written on its face. If the certificate is valid, the person(s) whose name(s) show on the certificate are the presumptive owners of the shares described therein. Further, I would say that the person(s) named are entitled to possession of the certificate, but that isn't always true; stock can be pledged as collateral, and the creditor would usually take possession of the certificate.

Someone who is entitled to stock but doesn't have the certificate (because it is lost, stolen, destroyed, or whatever) can apply to the issuing corporation to have the certificate replaced; this process, perhaps needless to say, takes time and requires a good explanation and the execution of a sworn affidavit.

So, in short, possession of a stock certificate by a person would be presumed correct, but if the person in possession isn't the shareholder named within, the presumption would be more easily rebutted; and ultimately, the rightful owner could assert control over the stock with or without the certificate.