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Sunday, March 01, 2009

POSSESSION STILL ONLY 9/10ths OF THE LAW

Ronald Griem at one point in time held shares in a British Virgin Islands company (the “BVI”). The BVI held a substantial securities account through a U.S. brokerage house.

Ronald passed away, and to the surprise of his family, they learned that Ronald had married before his death, and that his new wife held all of the bearer shares of the BVI. A dispute arose whether the BVI (and its securities account) belonged to the company or the new wife. The new wife claimed that her husband had gifted the shares to her before he died, that possession is “ten tenths of the law” for bearer shares in offshore companies, and thus she was the owner. She also cited provisions of Florida UCC law (673.2011(1), Florida Statutes) that the possessor of an “instrument” payable to bearer is the owner, even if the instrument was stolen. The trial court agreed with the wife, and granted her petition for summary judgment in her favor.

Not so fast, says Florida 3rd District Court of Appeal. First, shares of stock are not “instruments” under the UCC, but are “securities” and thus the cited UCC provision is not applicable. Analogizing to probate issues as to who is the owner of personal property of an estate after the death of a decedent, the appellate court indicated there are still some issues to be investigated to determine whether the wife is the owner of the shares, and that the personal representative should be allowed to avail itself of discovery to assist in such determination.  Possession, while important, is not alone determinative of ownership. Instead, the ownership issue must be resolved under BVI law, which includes numerous provisions and requirements for documentation that may nullify or support the wife's claim that mere possession of the bearer shares is dispositive.

The appellate court particularly noted that additional discovery should be allowed so that the parties can disclose to each other Mr. Griem's and the  spouse’s federal income tax returns (to determine how ownership was reported for income tax purposes), communications with the BVI registered agent or any custodians, and any pertinent communications with the stock brokerage house regarding the company, the shares, and the wife’s alleged ownership of the shares.

Of course, the wife may still prevail in her claim of ownership, but it will not be as easy as merely claiming that possession is 10/10’s of the law.

INGRID DIANA GRIEM, etc., Appellant, vs. ANITA BECKER, Appellee, 34 Fla. L. Weekly D449d, 3rd District. Case No. 3D07-2320. L.T. Case No. 05-4456. Opinion filed February 25, 2009.

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