## Facts

- Sellers (Heckes and Hurst) sold a 50-lot subdivision to Jonathan Manor, Inc. in 1959.
- The buyer made a down payment and executed a purchase-money promissory note for the remaining price, secured by a deed of trust on the lots.
- David and Joyce Sapp, the corporation’s principal officers/directors and sole shareholders, signed as individual guarantors of the note.
- A senior deed of trust encumbered the same property; after 15 lots were released from the sellers’ deed of trust based on payments, the senior lienholders foreclosed and sold the remaining 35 lots, eliminating the sellers’ security.
- The corporate buyer later defaulted; the sellers sued the Sapps on their guaranty for the unpaid balance and contractual attorney’s fees.

## Issues

1. Whether Code of Civil Procedure § 580b bars recovery against individual guarantors of a purchase-money note when a senior foreclosure has destroyed the seller’s security.
2. Whether the guarantors should be treated as accommodation parties (or similarly characterized) so as to limit or eliminate their liability.

## Decision

- The Court of Appeal reversed the judgment for the guarantors.
- Section 580b did not bar the sellers’ action against the Sapps on their guaranty.
- The sellers were entitled to recover the unpaid balance from the guarantors, including reasonable attorney’s fees as provided in the note.

## Legal Principles

- Section 580b’s anti-deficiency rule is directed to purchase-money obligations of the purchaser and applies to transaction forms that fall within the statute’s purposes (including allocating risk of inadequate security in vendor-financed sales).
- A guaranty is a separate contractual undertaking; enforcing it against guarantors is not necessarily the equivalent of seeking a barred deficiency judgment against the purchaser under § 580b.
- Where extending § 580b to guarantors would not serve the statute’s protective purposes—particularly when guarantors are insider principals of the purchasing entity—§ 580b does not preclude recovery on the guaranty.
- The guarantors’ characterization as accommodation makers did not relieve them from liability on their guaranty obligation under the circumstances presented.
- Contractual attorney’s fee provisions in the note may be enforced against liable guarantors.

## Conclusion

The court held that § 580b did not shield individual guarantors—who were insider principals of the corporate purchaser—from liability for the unpaid balance of a purchase-money note after a senior foreclosure eliminated the seller’s security, and it directed entry of judgment for the sellers including attorney’s fees.


Heckes v. Sapp, 229 Cal. App. 2d 549 (Cal. Ct. App. 1964)