California Western School of Law

Hartnett, James

California Western Law Review 
Volume 28 Number 1 Article 7 
1991 
National Energy Policy: Its History and the Need for an Increased 
Gasoline Tax 
James Hartnett 
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Recommended Citation 
Hartnett, James (1991) "National Energy Policy: Its History and the Need for an Increased Gasoline Tax," 
California Western Law Review: Vol. 28 : No. 1 , Article 7. 
Available at: https://scholarlycommons.law.cwsl.edu/cwlr/vol28/iss1/7 
This Article is brought to you for free and open access by CWSL Scholarly Commons. It has been accepted for 
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information, please contact alm@cwsl.edu. 
NATIONAL ENERGY POLICY: ITS HISTORY AND THE NEED
FOR AN INCREASED GASOLINE TAx
JAMES HARTNETT*
The importance of a national energy policy is great despite the minimal
attention the subject receives from lawyers, scientists, and engineers. In
particular, national concerns about global warming and the recently enacted
Clean Air Act Amendments, are both influenced by energy policy.' This
reflects the interest in the environment that has driven energy policy in recent
years.' This discussion presents the historical setting for our current
position on energy policy and makes suggestions to improve that position.
I. HISTORICAL ROOTS OF THE CURRENT NATIONAL ENERGY POLICY
In the fall of 1973, the U.S. experienced an Arab oil embargo that caused
a profound effect on our energy use. Prior to the embargo, national annual
consumption of energy was rising at a substantial rate, reaching over 70
quadrillion BTUs (Quads) by 1973. The 1973 embargo caused an increase
in the price of all energy fuels. As shown in Figure 1,1 this resulted in a
decrease in the amount of energy we used for the next few years. However,
memory in this country is relatively short. By 1975-76, energy consumption
was increasing again. This continued until 1979 when the Iranian crisis
occurred, again interrupting oil supplies. As in 1973, this caused an increase
in energy prices and a decrease in energy use. This time the nation's
memory was a little longer because the impact had been somewhat greater.
Again, however, by the early 1980s Americans were increasing their energy
consumption.
A. Factors Affecting Consumption
Despite the marked trend towards continuously increasing consumption,
* Professor, University of Illinois-Chicago. Director, Energy Resources Center, University
of Illinois-Chicago.
1. A major study called NAPAP spent billions of dollars to produce quantitative scientific
data on the impacts of acid rain. The Congress and the President did not act on those data; they
acted on the public perception that them was a major problem. As a consequence, the cost of
the Clean Air Act Amendments may be considerably greater than their basic benefits. We
should not repeat this performance with global warming. Any action taken on global wanming
should be based on scientific fact and not public perception.
2. See generally Bradley, Addressing the Environmental Needs of the Northeast: A Look at
the Future Alternative Fuels, 28 CAL. W.L. REv. (1991) (for a discussion of the results of
an environmental policy on our transportation energy-future).
3. ENERGY INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF ENERGY, STATE ENERGY
DATA REPORT, CONSUMPTION EsTIMATES 1960-1989, at Table 9 (1989) (DOE/EIA-0214(88))
[hereinafter CONSUMPTION ESTIMATES].
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CALIFORNIA WESTERN LAW REVIEW
current consumption levels are not as high as once expected. In 1973, the
energy companies and federal agencies were predicting that the U.S. would
be consuming 150 Quads of energy by the year 2000. However, it appears
today that energy consumption by the year 2000 is going to be much lower,
closer to 100 Quads than to 150 Quads.
The energy consumption history described above and shown on Figure 1
should be viewed in light of population and GNP growth for the same
period, shown in Figure 2.1 It is apparent that the increased energy
consumption serves an increasing population and an increasing gross national
product. A more accurate assessment is done by examining energy use per
gross national product-that is, how much energy it takes to produce a
dollar's worth of goods and services. The top curve on Figure 3 indicates
that starting in 1973 (the first Arab oil embargo) the energy use per GNP
went down. The country was producing more goods and services with the
same energy input, and thus was becoming more energy efficient. Today,
we are producing thirty percent more goods and services per unit of energy
than we were at the beginning of the 1970s. Although this is a significant
achievement, it must be compared with the energy use per GNP of our
international competitors. Japan and Germany, two of our major economic
competitors, have an energy use per unit GNP ratio that is twice as effective
as ours. They are using half the amount of energy we use to produce the
same goods and services.
B. Oil Consumption and Transportation
One of the major concerns in our energy picture is oil. In terms of its
overall importance the lower curve on Figure 4 shows that oil use represents
over 40 percent of our total energy consumption.
The oil consumption picture as a function of time, shown on the top curve
of Figure 4,5 resembles the overall energy picture. As a result of the Arab
oil embargo in 1973 oil consumption decreased. Then it began increasing
again a few years later. When the Iranian crisis occurred, oil use went
down. So, the nation's use of oil basically followed the same pattern as the
nation's use of energy.
An examination of transportation is presented because the transportation
sector is almost totally dependent on oil as a fuel. Two-thirds of the oil in
this country is used by the transportation sector. Accordingly, efforts to
decrease our dependence on oil must focus on the transportation sector.
Figure 5' shows that transportation energy use, including oil, is growing
very rapidly and currently represents over twenty-five percent of our national
4. BUREAU OF THE CENSUS, U.S. DEPARTMENT OF COMMERCE, STATISTICAL ABSTRACT OF
THE UNITED STATES, 1978, 1981, 1986, 1988, 1990, Tables 13 & 668 (1990) [hereinafter
STATISTICAL ABSTRACT].
5. See CONSUMPTION ESTIMATES, supra note 3, at Tables 10-14.
6. Id.
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NATIONAL ENERGY POLICY
energy consumption.
A related issue is the price of fuel adjusted for inflation. Figures 61 and
78 show the ratio of the price in any year relative to the price in 1970 for
a number of energy forms. For example, Figure 6 shows that the cost of
distillate fuel in 1988 was about sixty percent higher than it was in 1970.
Natural gas was over twice as expensive as it was in 1970. Figure 7 reveals
that the cost of coal was about fifty percent higher in 1988 than it was in
1970 and electricity was higher in 1988 then it was in 1970.
In contrast, the real price of gasoline today is lower than it was in 1970.
All other fuel forms have increased in real prices except motor gasoline.
This raises several questions: Does the price of gasoline reflect its actual
cost? Does it reflect the environmental cost? Does it reflect the cost of the
United States Navy escorting Kuwaiti tankers? Does it reflect the cost of the
Strategic Petroleum Reserve? Uniformly, the answer is no. This suggests
that we do have an energy policy-that policy is to keep the price of gasoline
as low as possible, regardless of the real economic and social costs of
producing gasoline.
Part of the cause of this problematic policy is the geographic distribution
of the world crude oil reserves. As shown in Figure 8,' fifty-seven percent
of the crude oil reserves lie in the Middle East. A substantial amount of the
world crude oil reserves, about nine percent, is also found in Eastern
Europe. North America has about twelve percent.
This information is important considering the magnitude of U.S. oil
imports. In 1973, 36% of oil used in this country was imported oil. As
shown on Figure 9,10 only 4.9% of the oil we used in this country in 1973
came from Arab nations belonging to the Organization of Petroleum
Exporting Countries (OPEC). An embargo of just that 4.9% caused the
disruptions of 1973 and 1974. By 1979, the time of the Iranian crisis,
dependency on imported oil had grown to 45% of our total oil use and
14.7% came from the Arab OPEC nations. Then it seemed for a while that
we learned our lesson. By 1985, we had decreased our dependency to about
32% and only 2.7% was coming from Arab OPEC countries. During this
period, we shifted from our undependable ally, Iran, to a newly re-found
partner, Iraq. Imports increased in the mid 1980s. By 1989, we were
importing 45% of our oil with 12% from the Arab OPEC countries. By
1990 about 50% of our oil was imported with 13% from the Arab OPEC
countries. This overdependence on imported oil is a main reason for our
liquid fuels problem.
Another related factor is the price of gasoline in this country compared
7. See generally ENERGY INFORMATION ADMINISTRATION, DEPARTMENT OF ENERGY, STATE
ENERGY PRICE AND EXPENDITURE REPORT, 1970-1982 (1987) (DOE/EIA-0376).
8. See generally id.
9. See generally id.
10. See generally id.
1991]
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84 CALIFORNIA WESTERN LAW REVIEW [Vol. 28
to other countries around the world. The price of gasoline in all other
industrial countries, including Japan and Germany, is three to four times the
U.S. price (excluding Canada)." The higher cost of gasoline in the rest of
the world has resulted in substantial increases in the efficiency of energy use
in these countries. Even at this late date, the U.S. has not learned that
lesson. A common argument in this country is that if we raise energy prices
substantially, we will not be competitive with the Japanese and Germans. In
fact, energy prices in both of these countries are substantially higher than in
the United States and this has not hurt their competitive position.
II. SUGGESTIONS FOR THE FUTURE OF U.S. ENERGY POLICY
A few suggestions can be made on the basis of these facts. First, it is
important to note that there are three major factors that influence energy use:
1) market forces; 2) new technologies; and 3) public policy measures (such
as taxes or incentives). These factors are interdependent; they are not
separate. For example, both market forces and technology can be affected
by policy. This presents an opportunity to use those three factors to
accomplish what should be our major goal: providing a secure supply of
energy at a reasonable price in an environmentally acceptable manner.
This goal can be accomplished in part by reducing our dependency on
imported oil. Several steps can be taken to accomplish that. First, we
should raise the federal gasoline tax by at least fifty cents. A large
percentage of that new tax revenue should be devoted to public transporta-
tion. Prior to the last Congress, there was a nine cent federal tax on
gasoline. Of that nine cents, eight cents went to maintaining and building
roads. Only one penny went to mass transportation. Again, I suggest that
we do have an energy policy: to continue keeping the automobile the
dominant form of transportation.
Although the market forces should be what drives prices, the market should
also reflect the cost of the commodity. The price of gasoline does not reflect
11. The international price of gasoline in U.S. dollars per gallon:
City September 1990 June 1990
Milan $4.73 $4.11
Paris 4.24 3.46
Tokyo 3.76 3.57
Brussels 3.56 2.91
Hong Kong 3.43 2.90
Madrid 3.34 2.71
London 3.25 2.58
Munich 3.15 2.46
Athens 3.15 2.39
U.S.A. 1.31 1.10
WORLD ENERGY CONFERENCE, THE UNITED STATES NAIONAL COMMHTEE OF THE WORLD
ENERGY CONFERENCE, SURVEY OF ENERGY RESOURCES (1974).
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NATIONAL ENERGY POLICY
the cost of producing and safeguarding the gasoline supply. Achieving this
requires a tax on gasoline similar to that found in every other major
industrial country in the world.
In addition to raising gas taxes, I propose three more actions to reduce our
dependency on oil. One is to increase the use of alternative transportation
fuels, such as compressed natural gas, methanol, and ethanol. We should
also diversify our sources of imported oil. There are other suppliers such as
China, the Soviet Union, and Mexico. They may prove to be more reliable
than our current sources.
Finally, new Corporate Effort Fuel Efficiency (CAFE) standards are also
necessary and represent a good energy policy. We should target forty miles
per gallon by the year 2000. The standards imposed by Congress resulted
in raising this country's fleet average from 14 miles per gallon to 28 miles
per gallon. This alone caused a significant decrease in the amount of oil
consumed. Arguments are made that new CAFE standards of 40 miles per
gallon should not be imposed. However, technology currently exists which
would allow us to go from 28 to 40 with the same size vehicles currently
available. If we do not meet this challenge, the Japanese will. They already
have announced a lean fuel vehicle that can attain 40 miles per gallon with
a contemporary vehicle structure.
It is time to strongly urge Congress to screw up its courage and impose a
higher tax on gasoline and begin to move this country off its substantial diet
of imported oil.
5
Hartnett: National Energy Policy: Its History and the Need for an Increased
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CALIFORNIA WESTERN LAW REVIEW
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Hartnett: National Energy Policy: Its History and the Need for an Increased
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CALIFORNIA WESTERN LAW REVIEW
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NATIONAL ENERGY POLICY
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Hartnett: National Energy Policy: Its History and the Need for an Increased
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CALIFORNIA WESTERN LAW REVIEW
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Hartnett: National Energy Policy: Its History and the Need for an Increased
Published by CWSL Scholarly Commons, 1991
CALIFORNIA WESTERN LAW REVIEW
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Published by CWSL Scholarly Commons, 1991
CALIFORNIA WESTERN LAW REVIEW
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English

National Energy Policy: Its History and the Need for an Increased Gasoline Tax

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On the Road of Good Intentions: Justice Brennan and the Religion Clauses

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Justice Brennan and Cultural History: New York Times v. Sullivan and Its Times

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The Road Less Traveled is the Better Way: New Routes to the Right to Jury Trial in ERISA Section 502(a)(1)(B) Actions

This article analyzes the current levels and kinds of mental health malpractice claims. It also discusses the direction of individual and institutional malpractice in the 1990s and considers potential reforms. Finally, the article argues that the current system is inadequate to deal with many mental health injuries and that patient plaintiffs should have the option of pursuing malpractice claims in a private, less threatening forum

Smith, Steven R.

Mental Health Malpractice in the 1990s

Law Review, California Western

California Western Law Review 
Volume 28 Number 1 Article 1 
1991 
Table of Contents 
California Western Law Review 
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Recommended Citation 
Law Review, California Western (1991) "Table of Contents," California Western Law Review: Vol. 28 : No. 1 
, Article 1. 
Available at: https://scholarlycommons.law.cwsl.edu/cwlr/vol28/iss1/1 
This Prefatory Matter is brought to you for free and open access by CWSL Scholarly Commons. It has been 
accepted for inclusion in California Western Law Review by an authorized editor of CWSL Scholarly Commons. For 
more information, please contact alm@cwsl.edu. 
CALIFORNIA WESTERN
LAW REVIEW
VOLUME 28 1991-1992 NUMBER 1
TABLE OF CONTENTS
ARTICLES
Thomas E. Dewey and Earl Warren: The Rise of the
Twentieth Century Urban Prosecutor
Lawrence Fleischer ................................... 1
Application of California Code of Civil Procedure
Section 580d to a Guaranty Secured by Real Property
Steven J. Lurie ..................................... 51
SYMPOSIUM-Alternative Fuels: Policy, Science, and Economics
Foreward
Robert A. Bohrer .................................... 57
Addressing the Environmental Needs of the Northeast:
A Look at the Future Alternative Fuels
Michael Bradley ..................................... 59
Environmental & Energy Policy Implications for
Reformulated Gasoline and Alternative Fuels
Thomas J. Lareau ................................... 65
National Energy Policy: Its History and the Need
for Increased Gasoline Tax
James Hartnett ..................................... 81
The U.S. "Clean" Fuels Program: Imperatives and Prospects
David B. Rivkin, Jr. .................................. 95
Biomass: An Ideal Feedstock for Ethanol Production
Norman D. Hinman ................................. 113
NOTE
"Driving" Under the Influence in California:
Mercer v. Department of Motor Vehicles
Kimberley F. Scott .................................. 123
1
Law Review: Table of Contents
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COMMENTS
The FDIC's Preemptive Power in Actions Against Insiders
of Insolvent Financial Institutions: A Matter of Priority
Linda D. Fox ...........................
Subjective Pain Testimony in Disability Determination
Proceedings: Can Pain Alone be Disabling?
Margaret C. Rodgers ......................
BOOK REVIEW
Stepping Stones: Successful Advocacy for Children
Reviewed by Janet Weinstein ..................
.......... 147
.......... 173
.......... 213
BOOKS IN BRIEF .................................... 223
BOOKS RECEIVED .................................. 225
2
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Lurie, Steven J.

California Western Law Review 
Volume 28 Number 1 Article 3 
1991 
Application of California Code of Civil Procedure Section 580d to 
a Guaranty Secured by Real Property 
Steven J. Lurie 
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Recommended Citation 
Lurie, Steven J. (1991) "Application of California Code of Civil Procedure Section 580d to a Guaranty 
Secured by Real Property," California Western Law Review: Vol. 28 : No. 1 , Article 3. 
Available at: https://scholarlycommons.law.cwsl.edu/cwlr/vol28/iss1/3 
This Article is brought to you for free and open access by CWSL Scholarly Commons. It has been accepted for 
inclusion in California Western Law Review by an authorized editor of CWSL Scholarly Commons. For more 
information, please contact alm@cwsl.edu. 
APPLICATION OF CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 580d TO A GUARANTY
SECURED BY REAL PROPERTY
Steven J. Lurie!
INTRODUCTION
A creditor' holding a note secured by a deed of trust and a guaranty which
is not secured by real property has rights against the trustor, the trustor's
security, and the guarantor.2 The extent of the guarantor's liability when the
trustor defaults on such a note is well settled by California case law or well
discussed by secondary authority A creditor holding a guaranty secured
by real property also has rights against the guarantor's security. In this
situation, an important issue remains unresolved. Specifically, does a
creditor who forecloses non-judicially on a deed of trust4 executed to secure
a guaranty have the right to obtain a deficiency judgment against the
guarantor, or does California Civil Procedure Code section 580d,5 which
prohibits a beneficiary from obtaining a deficiency judgment following a non-
judicial foreclosure sale, protect the guarantor from a deficiency judgment
following such a sale?
Courts should apply section 580d to a guaranty secured by real property.
* B.S. 1984, University of California, Berkeley; J.D. 1988, University of California,
Berkeley (Boalt Hall School of Law).
1. The words "creditor," "beneficiary," and "mortgagee" are used synonymously in this
article. The words "trustor" and "debtor," as well as the words "deed of trust" and "mort-
gage," are also used synonymously in this article.
2. A secured creditor's rights are limited in California by interrelated antideficiency and
foreclosure statutes. See, e.g., CAL. CIV. PROC. CODE § 726(a) (Deering 1983) (allowing only
one action and one form of action for enforcement of any right secured by a mortgage or deed
or trust); CAL. CIv. PROC. CODE §§ 726(b) and 580a (Deering 1982 & Supp. 1991) (limiting
any deficiency judgment to the amount by which the outstanding debt exceeds the fair value of
security sold); CAL. CIV. PROC. CODE § 580b (precluding any deficiency judgment when loan
is "purchase money" within meaning of statute); CAL. CIV. PROC. CODE § 580d (Deering Supp.
1991) (precluding any deficiency judgment following a nonjudicial sale).
3. See, e.g., R. BERNHARDT, CAUFORNIA MORTGAGE AND DEED OF TRUST PRACTICE,§§ 8.10-.18, at 404-13 (Cal. Cont. Educ. Bar ed. 1990); D. AUGUSTINE & S. ZARROW,
CALIFORNIA REAL ESTATE LAW PRACTICE, §§ 122.70-.75 (1987); and J. HErLAND, SECURED
REAL ESTATE TRANSACTIONS, §§ 9.35-.46, at 221-34 (Cal. Cont. Educ. Bar ed. 1974).
4. Technically, the creditor forecloses the trustor's equity of redemption in the secured real
property. See R. MAXWELL, S. RIESENFELD, J. HETLAND & W. WARREN, CALIFORNIA CASES
ON SECURITY TRANSACTIONS IN LAND 2 (3d ed. 1984). In practice, however, it is often said
that the creditor forecloses the security. See, e.g., Walker v. Community Bank,. 10 Cal. 3d 729,
734, 518 P.2d 329, 332, 111 Cal. Rptr. 897, 900 (1974) (debtor may invoke sanction aspect of
California Code of Civil procedure section 726 when creditor does "not foreclose on the
security."). This latter colloquial use will sometimes be used in this article.
5. All subsequent statutory references are to the California Code of Civil Procedure unless
otherwise indicated.
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Lurie: Application of California Code of Civil Procedure Section 580d to
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CALIFORNIA WESTERN LAW REVIEW
It is possible to construe section 580d as permitting a creditor to obtain a
deficiency judgment against a guarantor following a trustee's sale of the
guarantor's security since section 580d expressly provides deficiency
protection only to a debtor who executes a "note" secured by a deed of trust.
However, section 580d's exclusion of certain types of bonds suggests the
word "note" as used in section 580d should not be narrowly construed.
Additionally, and most importantly, providing section 580d protection to
guarantors who secure their guaranties with a deed of trust is consistent with
section 580d's purpose.
I. SECTION 580d's ExPREss LANGUAGE
It is possible that a court would permit a creditor to obtain a deficiency
judgment against a guarantor following a trustee's sale of the guarantor's real
property security since section 580d expressly provides deficiency protection
following a trustee's sale only to a debtor who executes a "note" secured by
a deed of trust. Specifically, section 580d provides that:
No judgment shall be rendered for any deficiency upon a note
secured by a deed of trust or mortgage upon real property.., in
any case in which the real property . . . has been sold by the
mortgagee or trustee under power of sale contained in the
mortgage or deed of trust.6
Moreover, although no California court has directly addressed whether the
word "note" in section 580d includes a guaranty, two cases suggest that the
word "note" is to be narrowly construed and thus does not include a
guaranty.
The first such case is Willys of Marin Company v. Pierce.7 In Willys, the
defendant-lessee executed a deed of trust encumbering the lessee's separate
real property to secure the lessee's performance of its obligations under the
lease. After the lessee breached the lease by failing to pay rent, the lessor
caused the real property security to be sold under the power of sale provision
contained in the deed of trust. The sale was for the purpose of satisfying
rent that was due up until the time of sale. When the lessee again failed to
pay rent, the lessor sued. The Court of Appeal rejected the lessee's claim
that the lessor was seeking a deficiency judgment which was barred by
section 580d. Rather, the court held that section 580d did not apply to the
lessor's action since the lessor was seeking to recover a deficiency after
foreclosing a deed of trust securing a lease rather than a note: "It seems
obvious that section 580d does not apply to obligations other than promissory
6. CAL. CIV. PROC. CODE § 580d (Deering Supp. 1991) (emphasis added).
7. 140 Cal. App. 2d 826, 296 P.2d 25 (1956)
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notes."'
In Passanisi v. Merit McBride Realtors, Inc.,9 the court also construed the
word "note" narrowly. In Passanisi, the plaintiff-trustors brought an action
to enjoin a trustee's sale. At trial, the defendant-beneficiary prevailed and
obtained a judgment for attorneys' fees pursuant to an attorneys' fees
provision in the deed of trust. After the trustors elected not to appeal from
the judgment, the trustee's sale took place. The trustors claimed, inter alia,
that under section 580d the sale of the property rendered the prior award for
attorneys' fees unenforceable. The court held that the judgment was
enforceable, reasoning, inter alia,'° that by its express terms, section 580d
applied to notes and not to actions for attorneys' fees."
If the word "note" in section 580d is indeed to be narrowly construed, as
Willys and Passanisi suggest, a guarantor who secures his or her guaranty
with real property would not have section 580d protection since a guaranty
is not a note. 12
1I. LEGISLATIVE INTENT
The conclusion reached in Willys and Passanisi has some justification.
Indeed, the legislative history of sections 580d and 580a in part suggests that
8. Id. at 831, 296 P.2d at28.
9. 190 Cal. App. 3d 1496, 236 Cal. Rptr. 59 (1987).
10. The court also considered the policy behind section 580d. See infra Section Il1.
11. Passanisi, 190 Cal. App. 3d at 1509, 236 Cal. Rptr. at 67. Indusco Management Corp.
v. Robertson, 40 Cal. App. 3d 456, 114 Cal. Rptr. 47 (1974), the only reported case in which
a creditor had a trustee's sale of a guarantor's real property security, does not address the issue
of whether a guarantor who secures his or her guaranty with real property has section 580d
protection. In Indusco, the debtor secured a note with a second deed of trust on a leasehold
estate in real property. The guarantor purchased the leasehold estate from the original debtor,
and guaranteed, but did not assume, the original note. The guarantor did, however, secure the
note with a deed of trust on his home. The guarantor's deed of trust did not secure the
guaranty. After the debtor defaulted on its payments, the senior lienholder foreclosed the
debtor's equity of redemption in the leasehold estate. The sold-out junior lienholder then had
a trustee's sale of the guarantor's home. After the sale, the junior lienholder sought to recover
a deficiency against the guarantor. The court held that the junior lienholder was estopped from
collecting a deficiency against the guarantor because the junior lienholder destroyed the
subrogation rights of the guarantor against the original debtor:
Since the Home Trust Deed secured the [original note] by its express terms (and
not the Guaranty executed by [the guarantor]), the conduct of the Trustee's Sale
by [the creditor] under the Home Trust Deed operated to preclude any recovery of
a deficiency judgment against [the original debtor on the original note] under
[section 580d].
Id. at 459 (emphasis added).
In contrast, when a creditor seeks to recover from a guarantor who secures his or her
guaranty with real property following a trustee's sale of such security, the issue of destroying
the guarantor's subrogation rights against the debtor does not arise.
12. See, e.g., Union Bank v. Gradsky, 265 Cal. App. 2d 40, 44, 71 Cal. Rptr. 64, 67 (1968)("An action by the Bank against [the guarantor] before any resort to the security is neither an
action on 'a note' nor is it an action to recover a 'deficiency.' The action is on the guarantee,
not on the note.").
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CALIFORNIA WESTERN LAW REVIEW
the legislature may have intended that the word "note" be narrowly
construed. When the legislature enacted section 580a seven years before
enacting section 580d, the legislature used the broad term "obligation." 13
In contrast, when the legislature enacted section 580d, it limited section
580d's application to a "note."' However, if the legislature truly intended
that section 580d apply only to a note, there would not appear to be a reason
for the legislature to have enacted the exceptions to section 580d contained
in the second paragraph of the statute. That paragraph provides as follows:
This section does not apply to any deed of trust ... given to
secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or which is made by a public utility subject to the
Public Utilities Act (Part 1 (commencing with Section 201) of
Division 1 of the Public Utilities Code).15
The bonds referred to in section 580d include not only bonds to raise
capital,16 but also bonds to guaranty performance. 7 If the legislature
intended to exclude guaranties from section 580d's scope by using the word
"note," it is unlikely that it would have specifically excluded a guaranty in
the second paragraph. Indeed, rather than explaining the scope of the word
"note," this exclusion of certain types of guaranties implies inclusion of other
guaranties."8
Also supporting the conclusion that the legislature intended to provide
section 580d protection to guarantors who secure their guaranties with real
property is the fact that providing guarantors with such protection is
consistent with section 580d's purpose of putting "judicial enforcement on
a parity with private enforcement. . . without denying the creditor his
13. Section 580a provides: "Whenever a money judgment is sought for the balance due upon
an obligation for the payment of which a deed of trust... was given as security, following the
exercise of the power of sale in such deed of trust..." such money judgment shall, assuming
that the procedural aspects of section 580a are followed, be reduced by the amount that the fair
value of the real property security exceeds the amount for which such security was sold. CAL.
CIV. PROC. CODE § 580a (Deering Supp. 1991) (emphasis added).
14. See Willys, 140 Cal. App. 2d at 831, 296 P.2d at 28.
15. See J. HErLAND, CAuFORNIA REAL ESTATE SECURED TRANSACIONS, § 6.15 (Cal. Cont.
Educ. Bar ed. 1970) ("If all forms of indebtedness other than notes are excluded in any event,
there would seem to be little purpose for the legislature's specific exclusion of a particular form
of bond."); J. Hetland, Deficiency Judgment Limitations in California-A New Judicial
Approach, 51 CAUF. L. REV. 1, 32-37 (1963).
16. E.g., CAL. PUB. UTIL. CODE § 70225 (Deering 1964) (Main County transit district);
CAL. PUB. UTIL. CODE § 13201 (Deering 1951) (mumcipal utility districts).
17. E.g., CAL. PUB. UTIL. CODE § 6010 (Decring 1951).
18. See, e.g., White v. Western Title Ins. Co., 40 Cal. 3d 870, 881 n.4, 710 P.2d 309, 314
n.4, 221 Cal. Rptr. 509, 514 n.4 (1985) ("Under the familiar maxim of expressio unius est
exclusio alterius it is well settled that, when a statute expresses certain exceptions to a general
rule, other exceptions are necessarily excluded.").
[Vol. 23
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CAL. CODE OF CIVIL PROCEDURE SECTION 580d
election of remedies." 19 Only a judicial foreclosure is subject to the defen-
dant's right of redemption.2' This "right to redeem . .. has the effect of
making the security satisfy a realistic share of the debt."21 Similarly, a
deficiency bar following a trustee's sale, while not discouraging underbid-
ding, makes underbidding irrelevant since it prevents a creditor from
profiting from an underbid.
The purpose of achieving a parity of remedies is served well by giving
section 580d protection to guarantors who secure their guaranties with real
property. If the creditor forecloses judicially, the guarantor has a right to
redeem under section 729.010.1 On the other hand, if the creditor
forecloses non-judicially, the guarantor has no right of redemption since there
would be no "decree of foreclosure" under section 729.010. The guarantor
must therefore have section 580d protection to ensure that the security
satisfies a realistic share of the debt, and thus put non-judicial foreclosure on
par with judicial foreclosure. Of course, this same purpose could be
achieved by giving the guarantor a right of redemption following a trustee's
sale, but such a rule would deny the creditor an election of remedies.
III. RESOLUTION OF CONFLICT BETWEEN SECTION 580d's EXPRESS
LANGUAGE AND FULFILLING SECTION 580d's PURPOSE
The express language of section 580d does not support giving a guarantor
deficiency protection following a trustee's sale of the guarantor's security,
while the purpose of section 580d supports giving the guarantor such protec-
tion. In such a situation, the statute should be interpreted to fulfill its
purpose. For example, in Freedland v. Greco,' the debtor executed two
notes, one secured by a chattel mortgage and one secured by a second trust
deed on real property. The two notes represented a single obligation. The
court determined that the creditor could not obtain a deficiency after
exhausting the real property security at a trustee's sale simply because the
creditor had two notes. The court reasoned that, although section 580d
might not literally apply to the unsecured note, to permit the creditor to
obtain a deficiency would defeat section 580d's purpose:
Taking into consideration the policies and purposes of the act, the
applicable rule of statutory construction is that the purpose sought
19. Roseleaf Corp. v Chierighino, 59 Cal. 2d 35, 43, 378 P.2d 97, 102, 27 Cal. Rptr. 873,
878 (1963).
20. CAL. CIV. PROC. CODE § 729.010(a) (Deering 1982) ("If the decree of foreclosure of
a mortgage or deed of trust on real property pursuant to Section 726 determines that a deficiency
judgment may be ordered against the defendant, the real property . . . shall be sold subject to
the right of redemption.").
21. Roseleaf, 59 Cal. 2d at 43, 378 P.2d at 102, 27 Cal. Rptr. at 878.
22. CAL. CIV. PROC. CODE § 729.010 (Deering 1982).
23. 45 Cal. 2d 462 n.8, 289 P.2d 463 n.8 (1955).
1991]
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56 CALIFORNIA WESTERN LAW REVIEW [Vol. 28
to be achieved and evils to be eliminated have an important place
in ascertaining the legislative intent.... Statutes should be inter-
preted to promote rather than defeat the legislative purpose and
policy.,
Here, the court continued, "[iut is unreasonable to say the Legislature
intended that section 580d could be circumvented by such a manifestly
evasive device."25
As in Freedland, the court in Bank of Italy National Trust & Savings Assn.
v. Bentley,' similarly interpreted a statute to promote its purpose. By its
literal language, section 726 applies only to "mortgages." The California
Supreme Court held, however, that section 726 also applies to deeds of trust.
The court reasoned that such a result would fulfill the purpose of section 726
since a deed of trust serves the same economic function as a mortgage.'
CONCLUSION
A guarantor who secures his or her guaranty with a deed of trust is in a
position analogous to a debtor who secures his or her note with a deed of
trust. Giving such a guarantor the same rights as such a debtor furthers the
purpose of section 580d. Section 580d therefore should apply to a guaranty
secured by real property. Accordingly, courts should not permit a creditor
who forecloses nonjudicially on a deed of trust executed to secure a guaranty
to obtain a deficiency judgment against the guarantor.
24. Id. at 467, 289 P.2d at 466.
25. Id.
26. 217 Cal. 644, 20 P.2d 940 (1933).
27. Id. at 657-58, 20 P.2d at 943. See also Roseleaf 59 Cal. 2d at 43-44, 378 P.2d at 102,
27 Cal. Rptr. at 878 (section 580d does not prevent sold-out junior from obtaining a judgment
on note because, inter alia, such a prevention would not serve section 580d's purpose);
Cornelison v. Kornbluth, 15 Cal. 3d 590, 542 P.2d 981, 125 Cal. Rptr. 557 (1975) (section
580d does not bar an action for bad faith waste following a trustee's sale but does bar action
when waste results from the depressed condition of the general real estate market since such
rules fulfill section 580d's purpose); Passanisi 190 Cal. App. 3d at 1508, 236 Cal. Rptr. at 66
(although the express language of section 580d applies only to actions upon a note, "in determin-
ing whether a particular recovery is precluded, we must consider whether the policy behind
section 580d would be violated by such a recovery").
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California Western Law Review, Vol. 28 [1991], No. 1, Art. 3
https://scholarlycommons.law.cwsl.edu/cwlr/vol28/iss1/3


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Application of California Code of Civil Procedure Section 580d to a Guaranty Secured by Real Property

Subjective Pain Testimony in Disability Determination Proceedings: Can Pain Alone be Disabling?

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