diff --git a/merkle/iavl_tree.go b/merkle/iavl_tree.go
index 7318e0889..da474318b 100644
--- a/merkle/iavl_tree.go
+++ b/merkle/iavl_tree.go
@@ -120,11 +120,14 @@ func (t *IAVLTree) Save() []byte {
 	return t.root.save(t)
 }
 
+// Sets the root node by reading from db.
+// If the hash is empty, then sets root to nil.
 func (t *IAVLTree) Load(hash []byte) {
 	if len(hash) == 0 {
-		panic("IAVLTree.Load() hash was nil")
+		t.root = nil
+	} else {
+		t.root = t.ndb.GetNode(t, hash)
 	}
-	t.root = t.ndb.GetNode(t, hash)
 }
 
 func (t *IAVLTree) Get(key interface{}) (index uint64, value interface{}) {
diff --git a/state/state.go b/state/state.go
index 46c92961b..c17c83730 100644
--- a/state/state.go
+++ b/state/state.go
@@ -320,7 +320,7 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 				err      error       = nil
 				caller   *vm.Account = toVMAccount(inAcc)
 				callee   *vm.Account = nil
-				appState             = NewVMAppState(s)
+				appState             = NewVMAppState(s) // TODO: confusing.
 				params               = vm.Params{
 					BlockHeight: uint64(s.LastBlockHeight),
 					BlockHash:   vm.BytesToWord(s.LastBlockHash),
@@ -340,11 +340,12 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 				}
 			}
 
-			appState.AddAccount(caller) // because we adjusted by input above, and bumped nonce maybe.
-			appState.AddAccount(callee) // because we adjusted by input above.
+			appState.UpdateAccount(caller) // because we adjusted by input above, and bumped nonce maybe.
+			appState.UpdateAccount(callee) // because we adjusted by input above.
 			vmach := vm.NewVM(appState, params, caller.Address)
-			ret, err_ := vmach.Call(caller, callee, outAcc.Code, tx.Data, value, &gas)
-			if err_ != nil {
+			// NOTE: Call() transfers the value from caller to callee iff call succeeds.
+			ret, err := vmach.Call(caller, callee, outAcc.Code, tx.Data, value, &gas)
+			if err != nil {
 				// Failure. Charge the gas fee. The 'value' was otherwise not transferred.
 				inAcc.Balance -= tx.Fee
 				s.UpdateAccount(inAcc)
@@ -357,7 +358,7 @@ func (s *State) ExecTx(tx_ blk.Tx, runCall bool) error {
 				appState.Sync()
 			}
 			// Create a receipt from the ret and whether errored.
-			log.Info("VM call complete", "caller", caller, "callee", callee, "return", ret, "err", err_)
+			log.Info("VM call complete", "caller", caller, "callee", callee, "return", ret, "err", err)
 		} else {
 			// The mempool does not call txs until
 			// the proposer determines the order of txs.
diff --git a/state/vm_app_state.go b/state/vm_app_state.go
index 75945640d..ef696c966 100644
--- a/state/vm_app_state.go
+++ b/state/vm_app_state.go
@@ -1,6 +1,7 @@
 package state
 
 import (
+	"bytes"
 	"sort"
 
 	ac "github.com/tendermint/tendermint/account"
@@ -61,16 +62,6 @@ func unpack(accInfo AccountInfo) (*vm.Account, bool) {
 	return accInfo.account, accInfo.deleted
 }
 
-// Used to add the origin of the tx to VMAppState.
-func (vas *VMAppState) AddAccount(account *vm.Account) error {
-	if _, ok := vas.accounts[account.Address.String()]; ok {
-		return Errorf("Account already exists: %X", account.Address)
-	} else {
-		vas.accounts[account.Address.String()] = AccountInfo{account, false}
-		return nil
-	}
-}
-
 func (vas *VMAppState) GetAccount(addr vm.Word) (*vm.Account, error) {
 	account, deleted := unpack(vas.accounts[addr.String()])
 	if deleted {
@@ -175,6 +166,7 @@ func (vas *VMAppState) SetStorage(addr vm.Word, key vm.Word, value vm.Word) (boo
 	return ok, nil
 }
 
+// CONTRACT the updates are in deterministic order.
 func (vas *VMAppState) Sync() {
 
 	// Determine order for accounts
@@ -200,18 +192,36 @@ func (vas *VMAppState) Sync() {
 		}
 	}
 
-	// Update or delete storage items.
+	// Determine order for storage updates
+	// The address comes first so it'll be grouped.
+	storageKeyStrs := []string{}
+	for keyStr := range vas.storage {
+		storageKeyStrs = append(storageKeyStrs, keyStr)
+	}
+	sort.Strings(storageKeyStrs)
+
+	// Update storage for all account/key.
 	storage := merkle.NewIAVLTree(
 		binary.BasicCodec, // TODO change
 		binary.BasicCodec, // TODO change
 		1024,              // TODO change.
 		vas.state.DB,
 	)
-
-	for addrKey, value := range vas.storage {
-		addrKeyBytes := []byte(addrKey)
+	var currentAccount *vm.Account
+	var deleted bool
+	for _, storageKey := range storageKeyStrs {
+		value := vas.storage[storageKey]
+		addrKeyBytes := []byte(storageKey)
 		addr := addrKeyBytes[:32]
 		key := addrKeyBytes[32:]
+		if currentAccount == nil || !bytes.Equal(currentAccount.Address[:], addr) {
+			currentAccount, deleted = unpack(vas.accounts[string(addr)])
+			if deleted {
+				continue
+			}
+			storageRoot := currentAccount.StorageRoot
+			storage.Load(storageRoot.Bytes())
+		}
 		if value.IsZero() {
 			_, removed := storage.Remove(key)
 			if !removed {
diff --git a/vm/vm.go b/vm/vm.go
index d81e827fd..a81ddd259 100644
--- a/vm/vm.go
+++ b/vm/vm.go
@@ -530,7 +530,7 @@ func (vm *VM) call(caller, callee *Account, code, input []byte, value uint64, ga
 			fmt.Printf(" => %v\n", log)
 
 		case CREATE: // 0xF0
-			value := stack.Pop64()
+			contractValue := stack.Pop64()
 			offset, size := stack.Pop64(), stack.Pop64()
 			input, ok := subslice(memory, offset, size)
 			if !ok {
@@ -538,19 +538,19 @@ func (vm *VM) call(caller, callee *Account, code, input []byte, value uint64, ga
 			}
 
 			// Check balance
-			if caller.Balance < value {
+			if callee.Balance < contractValue {
 				return nil, firstErr(err, ErrInsufficientBalance)
 			}
 
 			// TODO charge for gas to create account _ the code length * GasCreateByte
 
-			newAccount, err := vm.appState.CreateAccount(caller)
+			newAccount, err := vm.appState.CreateAccount(callee)
 			if err != nil {
 				stack.Push(Zero)
 				fmt.Printf(" (*) 0x0 %v\n", err)
 			} else {
 				// Run the input to get the contract code.
-				ret, err_ := vm.Call(callee, newAccount, input, input, value, gas)
+				ret, err_ := vm.Call(callee, newAccount, input, input, contractValue, gas)
 				if err_ != nil {
 					stack.Push(Zero)
 				} else {