Opinion
No. 22734
Decided June 3, 1931.
Principal and agent — Dealer not authorized to mortgage automobile placed in possession for display — Owner not estopped to recover automobile from pledgee or mortgagee — Floor-plan rule, protecting innocent purchasers, inapplicable.
1. Where possession of an automobile for the purpose of display in his showrooms is given a dealer, who afterward mortgages such automobile to a finance company, such dealer having no authority, express or implied, to pledge or mortgage such automobile, the owner and bailor of such automobile is not estopped to recover his property from the pledgee or mortgagee who may have taken possession thereof under his mortgage.
2. The so-called floor plan rule, whereby an owner who has placed a car on the floor of a retail dealer's showroom for sale is estopped to deny the title of an innocent purchaser who has purchased from such dealer in the ordinary retail dealing, without knowledge of any conflicting claim, does not apply to a pledgee or mortgagee.
ERROR to the Court of Appeals of Hamilton county.
This matter comes to this court from the Court of Appeals of Hamilton county. The facts out of which the controversy arises are as follows:
The National Guarantee Finance Company is engaged in the general finance business in Cincinnati, Ohio. The Pfaff Motor Car Company was the distributor, wholesaler, of Roosevelt automobiles in the Cincinnati district. On and prior to the middle of August, 1929, one George Seibert, doing business as the Seibert Motor Sales Company, was a dealer in motorcars, and had an establishment on Freeman avenue in Cincinnati, with a large sales and display room. In July, 1929, Seibert procured from the Pfaff Motor Car Company two Roosevelt automobiles, to be placed on the floor of his establishment for purposes of display; these cars having been loaned for such purpose by the Pfaff Motor Car Company.
There is some evidence tending to show that the Pfaff Motor Car Company had some arrangement with Seibert whereby he should pay for the two cars, and simultaneously with the delivery of such cars two additional cars would be delivered on credit. It is conceded, however, that for the purposes of this case the cars in question must be regarded as loaned for the purpose of display only. The brief of plaintiff in error recites:
"However, the trial court, in weighing the evidence, must have found the facts to be as Mr. Miller gave them, viz: that the cars were merely loaned to Seibert for the purpose of display and as this court cannot reverse on the weight of the evidence, we shall adopt for the purposes of this brief, the case as made by the testimony of Mr. Miller."
The National Guarantee Finance Company loaned Seibert $800 on one of these Roosevelt automobiles and $795 on the other, taking chattel mortgages securing the notes of Seibert in favor of the said National Guarantee Finance Company.
About August 15, 1929, Seibert committed suicide, leaving a hopelessly insolvent estate. The finance company took advantage of the usual provisions of the chattel mortgages, believing their security to be in jeopardy, and took possession of the property.
These automobiles were stored by the finance company with the Gibson Auto Storage Company. The finance company claimed to have had no information or intimation that the Pfaff Motor Car Company had any claim on these cars, and asserted that it advanced money to Seibert, the dealer, relying on the circumstance of the cars; being displayed on his sales floor and on the general custom of the automobile industry in and about Cincinnati that dealers were not furnished with automobiles by either manufacturers or distributors until payment had been made therefor.
The Pfaff Motor Car Company instituted replevin proceedings to secure its cars. The finance company filed a redelivery bond and took possession of the cars in question.
A jury was waived and the trial of the right of property was had in the common pleas court. The trial court found that the Pfaff Motor Car Company at the commencement of the case was entitled to the possession of the automobiles in question, and entered judgment accordingly. From that judgment the National Guarantee Finance Company prosecuted error to the Court or Appeals, in which court the judgment of the common pleas court was affirmed. Error is now prosecuted to this court to reverse such judgment.
Messrs. Cohen, Mack Hurtig, for plaintiff in error.
Messrs. Kunkel Kunkel, for defendant in error The Pfaff Motor Car Company.
Mr. C.S. Weakley, for defendant in error The Gibson Auto Storage Company.
The legal question to be determined in this case is whether or not the protection given an innocent purchaser for value in due course from a retail dealer in automobiles displayed upon his salesroom floor for sale shall be extended to a pledgee or mortgagee, who, without notice of true ownership, lends money to such dealer and takes a chattel mortgage as security upon automobiles so displayed upon the retail dealer's salesroom floor.
The underlying principle of the so-called floor plan doctrine is that for the protection of the buying public the owner has given implied authority to the agent to sell the car in question, and if the sale or transaction be one in the usual course of business the owner will be estopped to set up his title against an innocent purchaser who has invested his money, relying upon the apparent authority of the agent to sell, he having possession of the automobile in his showrooms and on the floor for sale.
While the true owner may thus jeopardize his title by placing his automobile in the hands of the retail dealer for sale, and allowing him to place it upon the salesroom floor for such purpose, it does not follow that he has authorized the dealer to mortgage the property or pledge the same and thus create an entirely new relationship between the owner and such dealer. The retail dealer, in the absence of an agreement, will not be permitted to so extend his authority. True, the owner may have clothed the dealer with apparent authority to sell, but there is no representation, express or implied, by the owner, that the dealer has authority to mortgage or pledge the car. Mere possession is not enough. It was held in Coolbaugh v. Atlantic Motor Finance Co., 101 N.J. Law, 215, 128 A. 595, that an automobile sales agent was not, by reason of such agency, authorized to mortgage an automobile which he had borrowed from his principal. W. E. Evans Son v. Pendarvis, 124 S.C. 489, 117 S.E. 716: "Where possession of an automobile truck is given to an agent with authority only to sell it to a prospective purchaser, such agent has no authority to mortgage it; the Bailment Act being inapplicable."
"It is a firmly established doctrine that power conferred upon an agent to sell personal property in his possession does not carry with it an implied power or authority to barter or exchange it for other property, and any attempt on the part of the agent to make such a disposition thereof, in the absence of a ratification by the principal, will be void as to the latter, and title thereto will not pass. An authority to sell does not include power to mortgage the property." 21 Ruling Case Law, 867.
Some earlier cases involving the same principle are Switzer v. Wilvers, 24 Kan. 384, 36 Am. Rep., 259; Wright v. Solomon, 19 Cal. 64, 79 Am. Dec., 196; and Ryan v. Stowell, 31 Neb. 121, 47 N.W. 637. See also 2 Berry on Automobiles (6th Ed.), Section 1731, page 1394; Davison v. Parks, 79 N.H. 262, 108 A. 288; 21 Ruling Case Law, page 886, Section 58; 2 Corpus Juris, page 650, Section 295, note 68; Huddy on Automobiles (8th Ed.), page 1210, Section 1086.
Our conclusion is that the law for the protection of the buying public, as recognized in the so-called floor plan system, cannot be extended so that protection may be given to a pledgee or mortgagee, in the absence of authority, express or implied, to so pledge or mortgage such property. Entertaining this view, the judgments of the courts below must be affirmed.
Judgment affirmed.
MATTHIAS, ALLEN, KINKADE and ROBINSON, JJ., concur.