In the case of private corporations, the court "may authorize the issua[nce] of receivers' certificates which will displace prior liens on the property if it is necessary to do this for the preservation of the property, but it cannot operate the business nor incur any further expense to the prejudice of prior lienholders without their consent." Montgomery Coal Corp. v. Allais, 3 S.W.2d 180, 182 (Ky. 1928). (emphasis added). Or, as one court has summarized, "the court cannot authorize the issue of receiver's certificates for the purpose of improving, adding to, or carrying on the business of the company, without first having the consent of creditors whose liens would be affected thereby."
Instead he has relied upon authority to the effect that taxes represent a legitimate preservation expense, for the payment of which receiver's certificates may be issued and made a paramount lien upon the property so preserved, to the pro tanto displacement of all prior liens. Hanna v. State Trust Co. (C.C.A.) 70 F. 2, 9, 30 L.R.A. 201; Montgomery Coal Corporation v. Allais, 223 Ky. 107, 3 S.W.2d 180; Lockport Felt Co. v. United Box, etc., Co., 74 N.J. Eq. 686, 70 A. 980; 53 Corpus Juris, 193. It is a far jump from the displacement of one paramount lien by another for preservation purposes to what was here attempted to be done. The Hanna v. State Trust Co. Case, supra, is a strong authority in favor of appellants.
The paramount public interest, and the protection of the franchise are considered of such importance as to warrant the issuance of certificates even though this involves the displacement of vested rights. Where the receivership involves a private business, the courts still exhibit a reluctance to permit the issuance of certificates having priorities superior to existing liens for a purpose other than strictly preservation. ( Montgomery Coal Corporation v. Allais, 223 Ky. 107, 3 S.W.2d 180.) This reluctance may be ascribed more to a feeling on the part of the courts that the issuance of certificates in the case of private enterprises is not a sound exercise of judgment rather than to any conclusion that they lack the power to issue the certificates in such cases.
paid. Likewise, the Corporation appears to have been satisfied with the assurance that it would receive payment in lieu of obtaining a forfeiture of the lease since it did not appeal. It would appear from the wording of the judgment that the chancellor did not decree a forfeiture because of the hardship it would work upon the other creditors and that the Corporation should be satisfied with recovering the amount of its debt. While the chancellor did not err in adjudging the Corporation a preference for the royalty, he did err in directing it paid before taxes, court cost and labor claims were satisfied. But the laborers do not appeal, therefore we cannot disturb that part of the chancellor's judgment putting the Corporation's royalty ahead of labor claims. Nor does the claim for royalty come ahead of the claims of International and Allstate, since they hold mortgages on certain equipment which were executed and recorded before such equipment was placed in the mine. It was written in Montgomery Coal Corp., v. Allais, 223 Ky. 107, 3 S.W.2d 180, in construing KS Sec. 2316, KRS 383.080, that where the seller's lien for purchase money was recorded before the property was placed in the mine that such lien was entitled to priority over the lessor's claim for royalty. In that opinion it was said that the lienholder was entitled to a separate sale of the equipment upon which it had recorded a purchase-money lien before the equipment was placed in the mine.