Title: Nationwide Papers, Inc. v. NW Egg Sales, Inc.
Citation: 416 P.2d 687, 69 Wash. 2d 72
Docket Number: 38489
State: Washington
Issuer: Washington Supreme Court
Date: July 14, 1966

69 Wn.2d 72 (1966) 416 P.2d 687 NATIONWIDE PAPERS, INC., Respondent, v. NORTHWEST EGG SALES, INC., Appellant.[*] No. 38489. The Supreme Court of Washington, Department One. July 14, 1966. Wright, Wendells, Froelich &amp; Power and Layton A. Power, for appellant. Howe, Davis, Reise &amp; Jones and Rex M. Walker, for respondent. HUNTER, J. This appeal is based upon an agreed statement of facts and presents a single issue, concerning the applicability of the statute of frauds (RCW 63.04.050) to the *73 following transaction between plaintiff (respondent), Nationwide Papers, Inc., doing business as Carpenter Paper Company, and defendant (appellant), Northwest Egg Sales, Inc. Defendant is a wholesale distributor of eggs and other food products. In November, 1963, defendant orally ordered 250,000 egg cartons from plaintiff, a wholesale distributor of paper products. Defendant instructed plaintiff to print defendant's proprietary design on the cartons. Plaintiff in turn, for its own account, ordered the manufacture of the cartons by its jobber, Fibreboard Paper Products Corporation. There was no relation between plaintiff and Fibreboard other than that of customer-supplier. Defendant was aware of the relationship, having previously ordered similar egg cartons from plaintiff, who had had Fibreboard manufacture them. While the manufacturing was in process, defendant canceled its order via telephone, and plaintiff immediately notified its jobber to cease processing plaintiff's order. The cartons had already been printed with defendant's proprietary design. Plaintiff was billed $5,026, which amount represented the jobber's expenses, less the salvage value of the cartons. Plaintiff's loss of profit by reason of the defendant's cancellation of its order was $677.34. Prior to trial of this cause, depositions taken by both parties revealed that there were no disputed material issues of fact, so both parties moved for summary judgment pursuant to Rule of Pleading, Practice and Procedure 56, RCW vol. O. The trial court heard arguments on both motions and entered an order denying defendant's motion and granting plaintiff's motion for summary judgment, awarding plaintiff damages of $5,703.34, together with costs and interest. Defendant appeals. Defendant's contention in the trial court and before this court is that recovery by plaintiff is barred by RCW 63.04.050, which codified the statute of frauds embodied in § 4 of the Uniform Sales Act. The trial court based its order upon its opinion that the statute of frauds did not bar plaintiff's claim because of the "special order" exception set *74 forth in RCW 63.04.050(2). The statute reads as follows: It is admitted that none of the conditions of subsection (1) of the statute have been met. The sole issue is whether manufacture of the goods by a third party at the seller's expense prevents application of the exception contained in subsection (2) of the statute. The question is one of first impression in this state. Defendant first argues that the Uniform Sales Act, from which our statute is taken, was intended to reproduce the Massachusetts rule, which provided that oral contracts for the sale of goods not yet in existence were within the statute of frauds unless the goods were to be manufactured by the seller for the buyer's special order and not for the general market. Defendant points out that the commissioners' note to § 4 of the Uniform Sales Act states that subsection (2) was intended to reproduce the rule set forth in Mixer v. Howarth, 21 Pick. (Mass.) 205, 32 Am. Dec. 256 (1838) and Goddard v. Binney, 115 Mass. 450, 15 Am. Rep. 112 (1874). However, the two cited cases did not involve manufacture of the goods by a third party. These cases furnished the basis for the *75 so-called special order exception to the statute of frauds, but they did not create the refinement that the seller alone must be the manufacturer of the goods. This refinement did not exist in the Massachusetts cases prior to the case of Smalley v. Hamblin, 170 Mass. 380, 49 N.E. 626 (1898), cited by plaintiff. In that case the manufacturer was a third party and the Massachusetts court held the exception did not apply. However, the commissioners' note did not refer to this latter case. At the least, the failure to include the Smalley case would seem to indicate a desire on the part of the commissioners to remain neutral in regard to the refinement added by the Smalley case. It is therefore not clear that the history of § 4 of the Sales Act, RCW 63.04.050, requires the construction for which defendant contends. Defendant argues that the rules of statutory construction nevertheless require such an interpretation of the statutory language; that each word and phrase of a statute must be given meaning and effect; that a statute must be construed, if possible, so that no clause, sentence or word shall be superfluous, void or insignificant. Defendant relies upon H.W. Myers &amp; Son, Inc. v. Felopulos, 116 Vt. 364, 76 A.2d 552, 25 A.L.R.2d 665 (1950); Atlas Shoe Co. v. Rosenthal, 242 Mass. 15, 136 N.E. 107 (1922); Eagle Paper Box Co. v. Gatti-McQuade Co., 99 Misc. 508, 164 N.Y.S. 201 (1917). These cases hold that the words "manufactured by the seller" must be literally construed. The reasoning of these cases has been severely criticized by Professor Corbin. In commenting upon the Myers case, he states: See, also, 16 Cornell Law Quarterly 412 (1931). In E.G. Lumber Co. v. New York Bondstone Corp., 15 Misc.2d 985, 987, 179 N.Y.S.2d 45 (1958), the court stated, quoting from Morse v. Canasawacta Knitting Co., 154 App. *76 Div. 351, 139 N.Y.S. 634 (1912), aff'd without op. 214 N.Y. 695, 108 N.E. 1101: [1] We agree with the reasoning of Professor Corbin, supra, and the reasoning quoted in E.G. Lumber Co. v. New York Bondstone Corp., supra. The obvious thrust of the statutory exception is to exclude from the operation of the statute of frauds those situations where the seller finds himself holding goods manufactured to a buyer's specifications and therefore unsalable on the general market. Neither is this interpretation inconsistent with the main objective of this section of the statute of frauds: to obtain certainty in contracts for the sale of goods and thereby avoid the opportunity of fraud being practiced by a seller upon a buyer. Under the exception of the statute, the fact that the goods are manufactured especially for the buyer and are unsalable to others accomplishes the objective of certainty consistent with the general purpose of the statute. [2] Language within a statute must be read in context with the entire statute and construed in a manner consistent with the general purposes of the statute. See, e.g., State ex rel. Public Util. Dist. No. 1 of Skagit Cy. v. Wylie, 28 Wn.2d 113, 182 P.2d 706 (1947). In In re Horse Heaven Irrigation Dist., 11 Wn.2d 218, 226, 118 P.2d 972 (1941), we stated: Commenting upon the literal construction of the language of the statute "manufactured by the seller" the court in E.G. Lumber Co., Inc. v. New York Bondstone Corp., supra, stated at 989: [3] We believe that a literal construction of the language "manufactured by the seller" would thwart the manifest purpose of the exception of the statute. It is our construction of the statute that the exception applies when the goods *78 procured by the seller at his expense are manufactured especially for the buyer and are not suitable for sale to others in the ordinary course of the seller's business. It should be noted that this holding is consistent with § 2-201 of the Uniform Commercial Code, scheduled to take effect in this state on June 30, 1967. The judgment is affirmed. ROSELLINI, C.J., OTT and HALE, JJ., and RUMMEL, J., Pro Tem., concur. [*] Reported in 416 P.2d 687.