Employer liable for damages to employees’ tools on bailment theory

Bailment situations arise frequently in agriculture. A bailment exists when personal property is delivered by one person (the bailor) to another person (the bailee) for a specific purpose that benefits either the bailor, the bailee, or both, with the understanding that the personal property will be returned at the end of the bailment. So, for example, when one farmer borrows another farmer’s tractor, that is a bailment, and a bailment relationship is created between the parties. What happens if the tractor is damaged or destroyed during the bailment? Well, there are various types of bailments and the law establishes various liability rules depending on the type of bailment involved. Those rules apply when the bailed property is damaged, stolen or lost. That’s what was involved in this case. Even though the case didn’t directly involve an agricultural set of facts, the court’s opinion is instructive as to the rules that apply for various types of bailment situations.

The plaintiffs were employees of an auto repair shop. They were required to provide their own tools to work on vehicles, and the tools were left at the shop after hours because it was not practical for the employees to cart them back and forth between home and work every day. One employee also kept a vehicle on the business premises that he was allowed to work on after hours. A fire destroyed the shop and destroyed the plaintiffs’ tools and the one employee’s automobile. The plaintiffs sued to recover damages on theories of negligence, res ipsa loquitor and bailment. The case was tried to a jury, which ruled for the plaintiffs on their bailment theory. The court denied the shop’s motion for a judgment notwithstanding the verdict, and the shop appealed.

On appeal, the court dealt with the bailment issue and first noted that the degree of care owed by a bailee depends on the type of bailment involved. If the bailment is one for the mutual benefit of both the bailee and bailor, any damage that occurs to the bailed property during the bailment creates a presumption that the damage is due to the bailee’s negligence. If the bailment is purely gratuitous, the bailee is only liable if the damage to the bailed property is due to the bailee failing to exercise reasonable care. The auto shop claimed that the bailment was simply a gratuitous bailment – the employees’ were allowed to keep their tools at the shop overnight solely for their own benefit. Under that theory, the shop would not be subject to a presumption of negligence. But, the court disagreed and upheld the trial court’s determination that the bailment was for the mutual benefit of both the auto shop and the employees - the shop stored the tools for the employees and in return received the benefit of the employees’ use of the tools to repair customers’ vehicles. That meant that a presumption arose that the auto shop was negligent. As for liability, the court noted that the ongoing water leakage which the auto shop knew about and which ultimately caused the fire was the shop’s responsibility. The court held that the trial court jury could reasonably have determined that the auto shop was negligent under the bailment theory, and affirmed the trial court.Johnson v. Dalton Auto Sales, Inc., No. 7-268/06-0970, 2007 Iowa App. LEXIS 741 (Iowa Ct. App. Jun. 13, 2007).