Fid. Loan & Trust Co v. Dennis

• Citation: 25 S.E. 546,93 Va. 504
• Court: Supreme Court of Virginia
• Decision Date: 04 August 1896
• Parties: FIDELITY LOAN & TRUST CO. v. DENNIS et al.

93 Va. 504

25 S.E. 546

FIDELITY LOAN & TRUST CO.

v.DENNIS et al.

Supreme Court of Appeals of Virginia.

Aug. 4, 1896.

Mechanics' Liens—Prior Mortgage—Apportionment of Proceeds.

Code, § 2483, provides that, in the enforcement of mechanics' liens, any incumbrance on the land before the work was commenced shall be preferred, on the distribution of the proceeds of sale, only to the extent of the value of the land, estimated, exclusive of the building, at the time of the sale, and the residue of the proceeds of the sale shall be applied to the satisfaction of the mechanics' liens. Held, that the values of land and improvements are not to be estimated as bearing a certain ratio to each other, in which proportion the proceeds shall be distributed, but that the value of the land is to be estimated at a certain fixed amount, which is to be paid to the prior incumbrancer from the proceeds before the holders of the mechanics' liens can participate therein.

Appeal from hustings court of Roanoke; John W. Woods, Judge.

Suit between R. G. Dennis and others and the Fidelity Loan & Trust Company. From the decree the trust company appeals. Reversed.

Thos. W. Miller and L. H. Cocke, for appellant.

Scott & Staples, for appellees.

RIELY, J. The controversy here is between the owner of a prior incumbrance by deed of trust on real estate and certain persons holding mechanics' liens for the construction of buildings thereon and materials furnished for the same as to the proper distribution of the proceeds of sale of the property. Its solution depends upon the true construction of section 2483 of the Code. It is a general rule that all buildings and improvements put upon mortgaged premises by the mortgagor, after the execution of the mortgage, become a part of the freehold, and inure, as such, to the benefit of the mortgagee. And there is no difference in this respect between a mortgage and a deed of trust, but the principle Is equally applicable to both. Many exceptions have been ingrafted upon this rule in modern times, and among them an exception in favor of that deserving class of citizens who, by their skill and labor and materials, have contributed to the improvement of the incumbered property. The lawmaking power of this state, as that of governments generally, deeming it inequitable that a prior incumbrancer should have the benefit of the increased value imparted to his security by the improvements put upon it until the claims of those whose skill, labor, and property created the improvements are satisfied, has wisely restricted the lien of the incumbrancer, until their claims have been discharged, to the land itself, exclusive of the improvements, and given to them a first lien on the improvements for their claims. This equitable principle pervades every part of the statute. It preserves to the prior incumbrancer the benefit of his lien to the extent of his original security, which Is the value of the land without the improve ments, and at the same time gives to the mechanic and to the furnisher of materials the first lien on the building or structure put upon the land for the amount of their debts. All this is very plain upon the face of the statute; and this equitable principle, which lies at Its foundation,.and pervades its every provision, is expressly directed to be applied in the distribution of the proceeds of sale of the premises, when these several liens are enforced by the court. It is only as to the manner of ascertaining the value of the land exclusive of the improvements, and giving to the prior Incumbrancer the benefit of his security to that extent, that any difficulty arises. As tills is the only question to be decided, it is only necessary to refer to and construe that...