Floor-Plan Rule Law and Legal Definition
Floor plan rule refers to a principle whereby an owner who had 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.
The following are examples of caselaw on the rule:
Under the "Floor Plan Rule," a floor-plan mortgage is void as against a bona fide purchaser without notice, on the theory that, notwithstanding the conditions of the mortgage and its record, an inference of apparent authority in a dealer to sell arises from the fact of his permission to exhibit the property, estopping and precluding a mortgagee from asserting a mortgage against such person.[Mutual Finance Co. v. Municipal Employees Union, 110 Ohio App. 341 (Ohio Ct. App., Cuyahoga County 1960)]
The floor plan rule is for the benefit of innocent purchasers without actual notice of the floor plan mortgage, acquiring the property in good faith in the usual course of trade. It does not apply to dealers who presumably are familiar with the registration and title laws nor does it apply to a pledgee or mortgagee.[Mut. Fin. Co. v. Meade, 161 N.E.2d 561 (Ohio C.P. 1959)]