The following papers numbered 1-8 read herein:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1-4

Opposing Affidavits (Affirmations)[*2]5-6

Reply Affidavits (Affirmations)7

Mercedes' Memorandum of Law8

In this action by plaintiff KTAV Publishing House, Inc. (KTAV) to recover damages for allegedly lost inventory, defendant Mercedes Distribution Center (Mercedes) moves for an order: (1) granting it summary judgment dismissing KTAV's verified amended complaint, and (2) granting it summary judgment in its favor on its counterclaim and awarding it judgment in the amount of $8,495.76 against KTAV.

KTAV is a corporation engaged in the business of book publishing, distribution, and related activities. Mercedes is a corporation engaged in the business of storing, warehousing, packing, and/or shipping books and other related products. Mercedes warehouses various clients' inventories of merchandise and provides these clients with physical distribution and data processing services related to the distribution of such merchandise. Mercedes' primary place of business is at the Brooklyn Navy Yard, in Brooklyn, New York.

In 2001, KTAV and Mercedes executed a Physical Distribution and Data Processing Agreement (the Agreement), in which Mercedes agreed to provide warehousing and distribution services to KTAV, as its client, to warehouse KTAV's inventory of merchandise at Mercedes' facility and provide KTAV with physical distribution and data processing services in exchange for a negotiated rent and fees associated with the merchandise's distribution and data processing. Article I of the Agreement, entitled "Term of This Agreement," stated that the Agreement would commence in 2001 for a three-year period and that, thereafter, the Agreement was to be automatically renewed and continued for additional periods of three years.

Article II of the Agreement, entitled "Warehouse Covenants and Obligations of Mercedes," provided that Mercedes was to receive, store, pack, and ship KTAV's inventory and process returned shipments, and render other ancillary services, and that Mercedes was required to provide a suitable location at its warehouse for the storage of KTAV's inventory and for packing, assembly of order, and processing of returns. Paragraph 10 of Section A of Article II of the Agreement set forth that "Mercedes shall furnish to [KTAV], as may be reasonably necessary physical stock counts, to permit [KTAV] to maintain proper inventory of products at Mercedes." Paragraph 11 of Section A of Article II of the Agreement provided that "Mercedes shall conduct, with the assistance and supervision of [KTAV], or its accountants, one annual physical inventory of [KTAV's] products located at Mercedes' premises, on a day or days to be specified by [*3][KTAV], with not less than 30 days' notice to Mercedes."

Pursuant to Article III of the Agreement, entitled "Data Processing Covenants and Obligations of Mercedes," Mercedes was to provide KTAV with a computer inventory control and invoicing system for KTAV's products stored and distributed by Mercedes. Under this computer invoicing control and invoicing system, KTAV was able to use Mercedes' computer system for order entry, accounts receivable, and inventory management.Section A of Article IV of the Agreement, entitled "Covenants of Client," required that KTAV procure insurance coverage for its inventory which named Mercedes as an additional insured. It stated as follows:

"[KTAV] covenants and agrees to obtain and maintain a comprehensive policy of insurance covering all of [KTAV's] products against all risks of physical loss or damage from any cause whatsoever while at the premises for any claim against Mercedes. [KTAV] shall name Mercedes as a co-insured in such policy."

According to Mercedes, this covenant and agreement by KTAV to procure insurance to protect both of them from any risks of physical loss or damage to KTAV's inventory of merchandise while stored at Mercedes' warehouse was a bargained-for benefit which the parties agreed upon in exchange for Mercedes agreeing to accept rent in a reduced amount. Pursuant to Article V of the Agreement, entitled "Charges for Services," KTAV, in consideration for the services rendered by Mercedes, agreed to pay Mercedes an annual rent charge for the warehouse space used which was invoiced and payable in 12 equal installments, which, in 2010, was in the amount of $5,000 per month.

The parties included a covenant in the Agreement with respect to the damages that KTAV could seek in the event that a dispute arose under the Agreement. Specifically, Section F of Article VII of the Agreement, entitled "Miscellaneous Covenants and Provisions," provided as follows:

"Mercedes shall not be liable to [KTAV] or any party claiming through [KTAV] for any consequential damages arising from the services specified by this Agreement."

After the execution of the Agreement, KTAV obtained insurance covering its inventory from Peerless Insurance through its insurance broker, Geisenheimer Agency. However, in contravention of Section A of Article IV of the Agreement, the insurance policy issued to KTAV failed to name Mercedes as a co-insured. The Agreement was renewed automatically every three years, with the parties carrying on their business relationship pursuant to the Agreement for nearly a decade.

KTAV's inventory of merchandise was stored at Mercedes in pallets that were six pallets long by two pallets wide and two pallets tall. Between 2001 and July 2009, pursuant to Section A of Article II of the Agreement, KTAV performed regular physical [*4]stock counts of its inventory stored at Mercedes' facility. In order to perform these physical counts of inventory, the individual pallets needed to be separated by a forklift because it would be impossible to determine what merchandise was in each pallet without being able to observe all four sides of the pallet.

In performing these physical counts of inventory, KTAV would request that Mercedes provide it with a fork lift and a warehouse employee, which Mercedes provided, to separate each individual pallet or skid of merchandise, and KTAV would perform a physical pallet by pallet and box to box count of its inventory on each individual pallet or skid within Mercedes' facility. KTAV would then record its physical count of the inventory on Mercedes' computer system. The merchandise on each pallet was recorded, one pallet at a time. The recorded inventory of merchandise entered into Mercedes' computer system was then compared against the computer inventory of the merchandise on file that was previously entered by KTAV and would be reconciled against such computer inventory on file. The last such physical count of KTAV's inventory was performed by KTAV in July 2009. At no point between 2001 and July 2009 did KTAV ever complain to Mercedes that any of its inventory was missing or otherwise report any shortfall of its inventory to Mercedes.

In late December 2009 through early January 2010, Mercedes advised KTAV that it was terminating the Agreement because it needed more space for Gilt Group (for which Mercedes was the distributor), and that KTAV needed to begin looking for a new warehouse to store its inventory. According to KTAV, Mercedes informed it that its inventory had been moved to another floor in its warehouse. In an e-mail dated February 3, 2010 sent by Adam Bengal (Bengal), who was KTAV's operational manager, to Joal Savino (Savino), who is Mercedes executive vice-president in charge of Mercedes' overall operations, Bengal stated that he needed to take 400 skids in the warehouse and get Bernard Scharfstein (Scharfstein), who is KTAV's president, to throw out 200 of them, and that he would then come out to the warehouse and mark boxes to throw out with big red tags.

Between June and August 20, 2010, KTAV began transporting its inventory from Mercedes' facility to a new warehouse, i.e., Whitehurst & Clark Book Distributors (Whitehurst & Clark), located in Flemington, New Jersey. In July and August 2010, in preparing for KTAV's move from Mercedes' warehouse to Whitehurst & Clark, Bengal, and Joan Attias (Attias), who was KTAV's former head of accounts receivable (and is now KTAV's comptroller), visited Mercedes' facilities about eight or nine times to sort through its inventory and mark (with stapled on pieces of paper) various pallets of merchandise for either destruction, charitable donation, or transfer to Whitehurst & Clark, using letters and a color coding system to indicate which way the inventory was to be disposed. An M and green color indicated the pallets were to be moved to Whitehurst and Clark, a G and white color indicated that the pallets were to be donated to charity, and a J and red color indicated that the pallets were marked for junking or destruction. [*5]Corresponding handwritten letters (M, G, or J) were placed on a list of these items (annexed as exhibit C to KTAV's opposition papers), and this list was the only documentation of which pallets of KTAV's inventory contained merchandise designated for destruction, donation, or transfer to Whitehurst & Clark.

In contrast to the complete, systematic physical inventory that KTAV had previously conducted in July 2009, Attias and Bengal, in July and August 2010, on behalf of KTAV, when creating this list, merely walked through the warehouse and estimated what merchandise was present based upon what they could see from one or two sides of the pallets, and they did not sift through the rows and stacks of pallets. Attias and Bengal did not use a forklift to deconstruct the rows and stacks of pallets of merchandise and did not record its merchandise on each pallet.

Subsequently, KTAV instructed Mercedes to follow its color-coded instructions with respect to the marked pallets of inventory and either destroy, donate, or prepare them for transfer to Whitehurst & Clark. According to Joel Goldstein (Goldstein), Mercedes' president, Mercedes followed instructions personally given by Bengal and destroyed those pallets of KTAV's merchandise color-coded red for destruction, donated those pallets of KTAV's merchandise color-coded white for donation, and transferred those pallets of KTAV's merchandise color-coded green to CH Robinson Worldwide, Inc. (CH Robinson), KTAV's shipping company, by loading, at its loading dock, the inventory onto trucks operated by CH Robinson.

On August 20, 2010, KTAV completed its removal of all of its inventory from Mercedes' warehouse and its move to Whitehurst & Clark. KTAV did not perform a comprehensive count of its inventory of merchandise stored at Mercedes in 2010 prior to moving to Whitehurst & Clark, and did not complain to Mercedes at any time between July 2009 (the time of the last physical count of KTAV's inventory) and August 20, 2010 that it was missing any of its merchandise.

However, in late September or early October 2010, after KTAV completed its move from Mercedes' warehouse to Whitehurst & Clark on August 20, 2010, KTAV performed a physical inventory of its merchandise and discovered that certain of its inventory was missing. On December 29, 2010, Bengal, on behalf of KTAV, submitted a claim letter (the December 29, 2010 letter) to its insurance broker, Geisenheimer Agency, seeking insurance coverage, pursuant to its insurance policy with Peerless Insurance, for the alleged missing inventory. Bengal, in the December 29, 2010 letter, stated that a physical inventory was taken each July by Mercedes and a select number of the items were verified by him, and that the last physical inventory was taken in July 2009. Bengal further stated, in the December 29, 2010 letter, that "[a]fter the move was complete in September, the physical inventory taken at Whitehurst & Clark revealed that approximately $90,000 worth of saleable merchandise (cost basis) was missing." Bengal set forth, in the December 29, 2010 letter, that he notified Savino and Chris Talay (Talay), who was the general manager of Mercedes, and walked through every floor of Mercedes' [*6]warehouse searching for the missing inventory without success, and could only infer that Mercedes either lost or discarded KTAV's inventory.

On January 5, 2011, Peerless Insurance denied KTAV's claim for insurance coverage and declined to make any payment on its claim. In denying coverage, Peerless Insurance stated that "[a]fter reviewing the facts of the loss, it was clear that the loss was only discovered after an inventory," and that "only upon moving from one location to another and then doing a physical inventory was the alleged loss discovered."

Following Peerless' denial of KTAV's insurance claim, KTAV, on June 29, 2011, filed this action against Mercedes. KTAV's amended complaint, dated November 7, 2011, alleges that after Mercedes informed it that it needed the space used by it and that its inventory had been moved to another floor in its warehouse, it, in late August 2010, completed its onsite inventory of its merchandise at Mercedes' warehouse. KTAV claims that, at that time, it became aware that a significant amount of its inventory was missing in the amount of at least $175,000. KTAV alleges that its president, Scharfstein, contacted Talay and reported the lost inventory and demanded the return of all of such missing inventory, and Talay responded that there was no other inventory. KTAV asserts that Scharfstein then conducted an onsite inspection and found none of the missing merchandise. KTAV claims that Mercedes lost its inventory and intentionally breached the Agreement with it by disposing, moving, removing, losing, or converting a portion of its inventory, and that Mercedes failed to exercise reasonable care with respect to its inventory.

KTAV, in its amended complaint, additionally alleges that in breach of the Agreement, Mercedes wrongfully ceased providing it with proof of delivery forms, resulting in its inability to provide proof of shipment to several of its customers and that, as a result, it was unable to collect the sums of money owed by them to it in the amount of approximately $10,000. KTAV also alleges, in its amended complaint, that Mercedes further breached the Agreement by discontinuing to provide it with monthly account receivable statements, and that, at the time of such discontinuance, there was approximately $316,479 owed to it from various customers, and that it was unable to recover these outstanding sums as a result.

KTAV's amended complaint alleges a first cause of action for violation of UCC 7-201 and 7-403, a second cause of action for breach of contract, a third cause of action for unjust enrichment, a fourth cause of action for conversion, and a fifth cause of action for negligence. Mercedes interposed an answer, dated January 31, 2012, containing denials of KTAV's allegations and defenses, including the defense of a failure by KTAV to mitigate its damages. Mercedes' answer also contains a counterclaim for breach of contract, which alleges that KTAV breached the Agreement by failing to remit the required payment of rent to it pursuant to invoices for April 2010 through the end of August 2010 (i.e., up to September 2010), and seeking to recover $8,495.76 as the amount of rent due, plus costs and interest. Discovery has taken place, including the [*7]depositions of Scharfstein, Attias, and Savino, and the production of documents, including the insurance policy and e-mails between the parties. KTAV filed its note of issue on August 1, 2013.

In addressing Mercedes' instant motion for summary judgment, the court notes that on a motion for summary judgment, the movant must make a prima facie showing, by tendering evidentiary proof in admissible form, of its entitlement to judgment as a matter of law (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). After the movant has made this prima facie showing, the burden shifts to the opposing party to demonstrate the existence of a genuine material triable issue of fact by producing evidentiary proof in admissible form (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman, 49 NY2d at 562). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to sustain this burden (Zuckerman, 49 NY2d at 562).

In support of its motion for summary judgment, Mercedes has submitted the sworn affidavit of Goldstein, who (as noted above) is its president. Goldstein explicitly attests that from the time KTAV delivered its inventory to Mercedes until August 20, 2010, Mercedes did not lose, discard, or otherwise dispose of any portion of KTAV's inventory, except in accordance with KTAV's instructions. Mercedes also annexes the deposition testimony of Attias, Scharfstein, and Savino, as well as documents obtained through discovery.

Mercedes contends that there is no evidence that it breached the Agreement or was negligent in any way with respect to KTAV's inventory. It maintains that KTAV cannot show that any loss occurred prior to its relinquishment of its control over KTAV's goods since KTAV's loss was not discovered until the inventory count was conducted at KTAV's new location, Whitehurst & Clark, some time after the goods had already been removed and transported pursuant to KTAV's instructions.

Mercedes argues that, as to the duty to make a physical count of the goods stored with it, KTAV was negligent in performing this physical count since it did not perform a comprehensive physical inventory, but merely had Bengal and Attias walk through the warehouse and estimate what merchandise was present based upon what they could see from one or two sides of the pallets. Mercedes points out that Bengal and Attias did not sift through the rows and stacks of pallets and did not deconstruct the rows and stacks of pallets, and, consequently, could not have counted the number of boxes on each pallet before they were put in the custody of KTAV's trucking company, CH Robinson. Mercedes also asserts that KTAV designated the goods for removal, and that all goods were removed in accordance with KTAV's instructions. Mercedes maintains that KTAV, therefore, cannot prove a loss for which it could be held liable.

Mercedes, by the foregoing, has made a prima facie showing of its entitlement to summary judgment, shifting the burden to KTAV to raise a genuine triable issue of fact. [*8]In opposition to Mercedes' motion, KTAV submits only ^[FN1] its attorney's affirmation and an affidavit from Scharfstein, along with its exhibit C list of items with handwritten letters and the December 29, 2010 letter to Geisenheimer Agency.^[FN2] Scharfstein states that Bengal sent a letter to Mercedes after completing his onsite inspection informing Mercedes of the missing merchandise. Scharfstein asserts that there was no need prior to July 2009 for KTAV to complain to Mercedes of missing merchandise since all of KTAV's merchandise in Mercedes' warehouse was located in one area and had not yet been moved. Scharfstein claims that the discovery of missing merchandise was made when the merchandise was moved and that Mercedes had physical control of the merchandise until it left its facility.

KTAV argues that there is an issue of fact as to whether prior to the final removal of its inventory, Mercedes negligently lost or disposed of its inventory in favor of another client. However, while Mercedes discarded or donated some merchandise at KTAV's direction, there is no evidence that this was not done in accordance with KTAV's instructions.

KTAV supports its argument that the merchandise was missing prior to its moving to its new location at Whitehurst & Clark with Scharfstein's affidavit, in which Scharfstein points to the exhibit C list and states that the absence of KTAV merchandise is indicated by the items which have no notation next to them. Scharfstein attempts to argue that this shows that the inventory was missing prior to the time that it was moved from Mercedes' warehouse. However, as indicated by Attias, who made the handwritten notations on the exhibit C list, she and Bengal did not remove the rows and stacks of pallets and go through all of the inventory or perform a comprehensive check of its inventory prior to the time that Mercedes tendered KTAV's merchandise to CH Robinson for transfer to Whitehurst & Clark (Attias' Dep. Transcript at 52-53).

Moreover, while Scharfstein, at his deposition, first stated that the missing inventory was discovered before KTAV moved its inventory to Whitehurst & Clark, he, upon further questioning, admitted that he did not know how he knew this (Scharfstein's Dep. Transcript at 54). Scharfstein testified that other than knowing that Bengal and [*9]Attias went to Mercedes to check out the inventory, he was "not sure" of any basis of knowledge to state that the missing inventory was discovered before KTAV moved its inventory from Mercedes to Whitehurst & Clark and that he had "no personal knowledge" of this (Id. at 54-55).

Indeed, Scharfstein testified, at his deposition, that he had no involvement in warehousing KTAV's inventory (Id. at 11). He further testified that he was not present when the inventory was taken or when the inventory was determined to be missing, and that he had no personal knowledge of the missing inventory and only knew what he had been told by Bengal (Id. at 20). He had no recollection of discussing the missing inventory with Bengal or of how much money Bengal had told him was the value of the missing inventory (Id. at 22-23). He testified that the only knowledge he had of missing inventory was the missing inventory report provided by Bengal (Id. at 28).

Significantly, Scharfstein further testified that he had "no knowledge of the claims of this lawsuit" (Id. at 36). He specifically testified that he had no personal knowledge that Mercedes moved and removed KTAV's inventory without approval other than the documents of missing material (Id. at 38). He also conceded that Mercedes did not intentionally lose and take the inventory (Id. at 39). He testified that he did not know when the last physical inventory of Mercedes' facility was performed by KTAV, or whether a physical inventory of Mercedes' facilities was performed by KTAV in August 2010 (Id. at 53-54). He testified that he did not know on what date the missing inventory was discovered (Id. at 54).

Furthermore, when shown the e-mail dated February 3, 2010 from Bengal to Savino, which (as set forth above) stated that KTAV needed to throw out 200 skids of merchandise, Scharfstein admitted that this would constitute significantly more than $175,000 in merchandise (Id. at 60, 65). Notably, Scharfstein testified that he was "not sure" if it were possible that the missing inventory was missing because Bengal directed Mercedes to throw it out and then he failed to update the computer system before KTAV moved (Id. at 65, 67).

Where an affiant makes statements in an affidavit which contradict admissions made by him or her in his or her prior sworn deposition testimony in an attempt to raise feigned issues of fact and avoid the consequences of his or her prior testimony, such statements are insufficient to defeat summary judgment (see Kudisch v Grumpy Jack's, Inc., 112 AD3d 788, 2013 NY Slip Op 08412, *2-3 [2d Dept 2013]; Sunshine Care Corp. v Warrick, 100 AD3d 981, 983 [2d Dept 2012]; Garcia-Rosales v Bais Rochel Resort, 100 AD3d 687, 687 [2d Dept 2012], lv denied 20 NY3d 858 [2013]; Cuebas v City of Yonkers, 97 AD3d 779, 780 [2d Dept 2012]; Steinsvaag v City of New York, 96 AD3d 932, 933 [2d Dept 2012]; Gomez v Rodriguez, 31 AD3d 497, 498 [2d Dept 2006]; Israel v Fairharbor Owners, Inc., 20 AD3d 392, 392 [2d Dept 2005]). Here, the assertions made by Scharfstein in an attempt to create an issue of fact lacks a proper evidentiary foundation since he previously testified, at his deposition, that he has "no personal [*10]knowledge of the facts of this case" and circumstances underlying this lawsuit concerning the alleged missing merchandise (Scharfstein's Dep. Transcript at 52-53). Scharfstein testified that the only one with any personal knowledge was Bengal and possibly Attias (Id. at 52). Unfortunately, Bengal died in July 2012. Attias has not submitted any affidavit in opposition to Mercedes' motion.

Attias testified, at her deposition, that she and Bengal did not count the skids when they were leaving and preparing to go to Whitehurst & Clark (Attias' Dep. Transcript at 52). She stated that Bengal planned to do an inventory when the merchandise arrived at Whitehurst & Clark, and that the inventory was performed when the merchandise was at Whitehurst & Clark (id.). She testified that until that point, KTAV did not have an actual count of what inventory was or was not at Mercedes (id.). She further testified that when she and Bengal were checking the inventory at Mercedes' warehouse against a schedule provided by Mercedes, they did not actually count each skid (Id. at 53).

Attias also testified that she only knew the value of the missing inventory based upon what Bengal had told her and that she did not know why the December 29, 2010 letter to Geisenheimer Agency stated that it was only $90,000 in missing inventory and that it was also claimed that $175,000 was missing (Id. at 60-61). Attias admitted that the only recording of inventory at Mercedes prior to the move was the handwritten notations made by her on the exhibit C list (Id. at 21,110). Attias admitted that in making these notations on the exhibit C list, she and Bengal did not go to each skid and count how many boxes were on each skid and did not open up each box and count how many books were in each box (Id. at 38)

Attias testified that only after the inventory was transferred to its new warehouse at Whitehurst & Clark was a physical count performed and the missing merchandise discovered (Id. at 52). In fact (as noted above), KTAV's own December 29, 2010 letter to Geisenheimer Agency explicitly stated that the inventory was taken after its move was completed and revealed the missing inventory, and this was the very basis for Peerless Insurances's denial of KTAV's insurance claim.

Thus, since no physical count of the inventory was performed prior to KTAV's move to Whitehurst & Clark and Scharfstein and Attias lacked personal knowledge of the goods which were present prior to the move (and Bengal is deceased and can no longer testify), KTAV's claim that the inventory was missing prior to such move is only based upon mere speculation and conjecture which is insufficient to defeat a motion for summary judgment (see Zuckerman, 49 NY2d at 562; Babino v City of New York, 234 AD2d 241, 241 [2d Dept 1996]).

KTAV, however, further argues that there is an issue of fact as to whether Mercedes failed to provide an annual inventory of KTAV merchandise in accordance with the Agreement. Scharfstein points to the fact that Savino testified, at his deposition, that Mercedes would perform a physical inventory variance report to verify the physical inventory against the computer inventory and that such an inventory was performed once [*11]a year or on request (Savino's Dep. Transcript at 59). Scharfstein contends that while the year had not ended, Mercedes should have nevertheless performed an inventory prior to KTAV's move to Whitehurst & Clark.

This argument is rejected. As set forth above, paragraph 11 of Section A of Article II of the Agreement only required that Mercedes conduct, with the assistance and supervision of KTAV, one physical inventory of KTAV's products a year, on a date to be specified by KTAV, with not less than 30 days' notice to Mercedes. The last physical inventory was performed in July 2009, and Scharfstein does not deny that no such request was made by KTAV to Mercedes for such physical inventory in July or August 2010. Savino testified, at his deposition, that no one from KTAV ever asked him or anyone at Mercedes whether Mercedes could provide assistance in performing its inventory in 2010 (Savino's Dep. Transcript at 53). Savino specifically testified that he was not asked by KTAV to perform an inventory, and that he would not perform an inventory unless requested to do so because it required, among other things, the stopping of all shipping and the moving of pallets by a forklift (Id. at 54-55, 58-59). Thus, there was no breach of Article II of the Agreement by Mercedes since Mercedes was not obligated to provide such an inventory in the absence of any request by KTAV. KTAV's insistence that Mercedes had the burden to perform the inventory is, therefore, unsupported by the terms of the Agreement and the unrefuted deposition testimony. Indeed, the deposition testimony shows that Mercedes proceeded as directed by KTAV.

KTAV also contends that there is an issue of fact as to whether Mercedes refused to aid or impeded KTAV from locating its inventory at Mercedes' facility prior to the removal of that inventory to Whitehurst & Clark. This contention is devoid of merit. There is no evidence whatsoever to support such a claim, and such claim is contradicted by the deposition testimony which indicates that KTAV had complete access to Mercedes' facility, and that Attias and Bengal went there and looked through its inventory prior to the move. Thus, there is no evidence of any liability on the part of Mercedes with respect to the missing inventory.

Additionally, Section A of Article IV expressly provided that KTAV was obligated to procure insurance naming Mercedes as a co-insured. Mercedes asserts that this was a negotiated term and was an essential element of the parties' bargain since if it had the burden to hold KTAV harmless against loss to its inventory the cost of storage would have been significantly higher than $5,000 per month. KTAV admitted, in a notice to admit, that it failed to name Mercedes as a co-insured on its insurance policy concerning the inventory that was stored at Mercedes' facility.

Where a party breaches an agreement to procure insurance naming another party as an additional insured, the other party is entitled to all damages resulting from the breach, including a defense in the underlying action and indemnification for its liability, if any (see Tkacs v Dominion Constr. Corp., 278 AD2d 486, 487 [2d Dept 2000]). Therefore, Mercedes has a defense to any liability on its part for the loss of KTAV's inventory since [*12]it would be entitled to be indemnified by KTAV for such liability based upon its failure to procure insurance covering it (see Kinney v Lisk Co., 76 NY2d 215, 219 [1990]; DiBuono v Abbey, LLC, 83 AD3d 650, 652 [2d Dept 2011]).

Consequently, no triable issue of fact is raised with respect to any liability by Mercedes for KTAV's lost inventory. As to the specific causes of action asserted by KTAV in its amended complaint, KTAV's first cause of action alleges that Mercedes failed to exercise reasonable care and breached the Agreement by failing to safeguard the goods and failing to return the goods upon demand from it in violation of UCC 7-204 and 7-403.

Pursuant to UCC 7-204, "[a] warehouse[] is liable for damages for loss of or injury to the goods caused by [its] failure to exercise such care in regard to them as a reasonably careful [warehouse] would exercise under like circumstances but unless otherwise agreed [it] is not liable for damages which could not have been avoided by the exercise of such care." Here, there is no evidentiary showing of any lack of care on the part of Mercedes. UCC 7-403 (1) (b) provides that a bailee of goods must deliver the goods to the bailor unless and to the extent that the bailee establishes loss or destruction of the goods for which the bailee is not liable. Mercedes has established that it is not liable for any loss or destruction of KTAV's goods. Thus, Mercedes is entitled to summary judgment dismissing KTAV's first cause of action.

KTAV's second cause of action, insofar as it alleges a breach of contract based upon the missing inventory, must be dismissed since, as discussed above, no triable issue of fact is raised as to any breach of the Agreement by Mercedes. KTAV's third cause of action for unjust enrichment based upon the receipt of rent by Mercedes and its alleged failure to provide the services agreed upon must be dismissed since KTAV cannot maintain such a claim where a valid and enforceable written contract, i.e., the Agreement governs and controls the subject matter of KTAV's claim (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; Goldstein v CIBC World Mkts. Corp., 6 AD3d 295, 296 [1st Dept 2004]).

Summary judgment dismissing KTAV's fourth cause of action for conversion must be granted since conversion "is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights'" (State of New York v Seventh Regiment Fund, 98 NY2d 249, 259 [2002], quoting Vigilant Ins. Co. of Am. v Housing Auth. of City of El Paso, Tex., 87 NY2d 36, 44 [1995]). Here, there was no such unauthorized assumption and exercise of the right of ownership by Mercedes over KTAV's inventory, and, in fact, Scharfstein admitted, at his deposition, that Mercedes did not intentionally take any of KTAV's inventory (Scharfstein's Dep. Transcript at 38-39). KTAV's fifth cause of action for negligence must also be dismissed since no triable issue of fact has been raised as to any negligence on the part of Mercedes. Thus, summary judgment dismissing KTAV's claims with respect to the claimed lost inventory must be granted (see CPLR 3212 [b]). [*13]

As set forth above, KTAV's amended complaint also alleges that Mercedes is liable to it for $316,479 arising from Mercedes allegedly shutting off access to its accounts receivable system, thereby denying it access to its accounts receivables statements, which, in turn, thwarted its ability to recoup $316,479 from its customers. In addition, KTAV alleges that it was unable to collect $10,000 from its customers due to the failure by Mercedes to provide it with proof of delivery forms. KTAV asserts, in its first cause of action, that this constituted a breach of the Agreement, and alleges, in its fifth cause of action, that this constituted negligence.

Both of these claims by KTAV, however, seek to recover consequential damages. Consequential damages are defined as "[l]osses that do not flow directly and immediately from an injurious act but that result indirectly from the act," and they are also termed indirect damages (Black's Law Dictionary [9th ed 2009]). Such damages are "the natural and probable consequence of the breach" (Reads Co., LLC v Katz, 72 AD3d 1054, 1056 [2d Dept 2010]). Consequential damages, however, were expressly waived pursuant to Section F of Article VII of the Agreement, which (as noted above) provided that Mercedes would not be liable to KTAV for any consequential damage arising from the services specified by the Agreement. Thus, these claimed consequential damages are precluded by the Agreement and cannot be recovered by KTAV.

In any event, Attias testified, at her deposition, that KTAV collected $310,000 of the alleged outstanding $316,479 from its customers (Attias' Dep. Transcript at 73-74, 138). Scharfstein similarly testified that he did not dispute that $310,000 of this sum was recovered (Scharfstein's Dep. Transcript at 36). Thus, to the extent that KTAV has already recovered this outstanding sum, KTAV's allegations that it was unable to collect such sum from its customers due to the denial of access by Mercedes to its computerized accounts receivable system has been rendered moot. However, Scharfstein, in opposition to Mercedes' motion, asserts, as to KTAV's claims regarding the denial of access to Mercedes' accounts receivable system, that KTAV was forced to employ alternative means to process the accounts receivable at a cost of time and money, and that, at the present time, it has been unable to collect approximately $6,000 of the $316,479 due to KTAV from various customers.

This assertion, however, is insufficient to sustain KTAV's claim for this sum. Not only is KTAV precluded from recovering this sum due to its inability, under Section F of Article VII of the Agreement, to recover consequential damages, but, in addition, Attias admitted that she was unaware of any reason that Mercedes was obligated to pay for KTAV's inability to collect the outstanding $6,479, and she conceded that KTAV's inability to collect "was not related to Mercedes" (Attias' Dep. Transcript at 76, Attias' Continued Dep. Transcript at 138-140). Moreover, Attias conceded that KTAV continued to have access to Mercedes' accounts receivable system from the time that KTAV left on August 20, 2010 all the way through May 4, 2011, nine months beyond the termination of the Agreement, which exceeded the requirements of the Agreement (Attias' [*14]Dep. Transcript at 73).

In opposing the dismissal of KTAV's claim for $10,000 in damages due to the alleged failure by Mercedes to provide KTAV with proof of delivery forms, Scharfstein merely reiterates the conclusory allegation in KTAV's amended complaint that Mercedes wrongfully ceased providing KTAV with proof of delivery forms, resulting in KTAV's inability to collect $10,000 from its customers. Since such a claim constitutes consequential damages, it is expressly precluded by Section F of Article VII of the Agreement. Furthermore, KTAV cannot establish that it is entitled to $10,000 in damages due to the alleged failure by Mercedes to provide it with proof of delivery forms. Attias specifically admitted that KTAV cannot establish that it was unable to collect $10,000 from its customers because of Mercedes since she never performed an analysis of which proof of delivery forms were not provided to KTAV by Mercedes (Attias' Continued Dep. Transcript at 136-137).

Thus, summary judgment dismissing these claims regarding access to Mercedes' accounts receivable system and proof of delivery forms must be granted (see CPLR 3212 [b]). With respect to Mercedes' counterclaim, which seeks to recover $8,495.76 in unpaid rent, Scharfstein testified that KTAV currently owes Mercedes approximately $8,500, which has not been paid (Scharfstein's Dep. Transcript at 48-49). Similarly, Attias conceded that KTAV stopped paying the last two or three months of rent, and that KTAV owes Mercedes this rent (Mercedes Dep. Transcript at 56-57). Therefore, the fact that this sum is owed by KTAV to Mercedes is undisputed and, as such, Mercedes is entitled to judgment in its favor on its counterclaim (see CPLR 3212 [b]).

Accordingly, Mercedes' motion for summary judgment dismissing KTAV's verified amended complaint and awarding it judgment in its favor on its counterclaim in the amount of $8,495.76 against KTAV is granted.

This constitutes the decision, order, and judgment of the court.

E N T E R,

J. S. C.