to priority, at least over general creditors, but it receives no priority over liens existing before the bankruptcy proceeding began. In order to establish his right to priority over preexisting liens a claimant must show either a specific and valid order of the Court or exceptional circumstances which would have led the Court to issue such an order. No such showing has been made here.
The second category is money lent to the trustees in excess of the amount which they were authorized to borrow. This money was also used in the operation of the business. As to it, Mr. Sheerr is not entitled to any priority. The claimant urges that he is entitled to some form of subrogation to the rights of the trustees because of these loans to them and the fact that when an arrangement under Chapter XI was made all of the assets of Code Products were turned over to him. These loans were voluntary in the truest sense of the word. The trustees had been authorized to borrow $ 30,000. Mr. Sheerr lent them this sum and then, without authorization from the Court, supplied additional money to them, possibly with the hope that ultimately he would become the owner of the business. In certain cases the Court has applied the doctrine of subrogation when money has been lent voluntarily to discharge specific liens with the intention that the lender shall have the same security as the lien discharged. That is an exception to the general rule that subrogation cannot arise as a result of a voluntary advance. In the present case the requirements of the exception are not met. Moreover, it is difficult for me to understand just what right the trustees had which the claimant is attempting to assert.
The third category consists of advances in the form of loans made after the confirmation of the plan of arrangement on January 3, 1956, and before the receivership. As stated before, Robert Sheerr received all the assets of Code Products on that date. He entered into an agreement with Code Products by which he transferred the assets to it, taking back a financing and security agreement. Of course, these loans have no priority whatever and, as to them, Mr. Sheerr is a general creditor.
Robert Sheerr's Claim to Machinery
Certain machinery belonging to Robert Sheerr and used by Code was included by the receiver in a lease which he made in 1958 when he leased the entire plant. He now claims that he is entitled, out of the receivership assets, to the fair rental value of the machinery.
There is no substantial dispute as to the fact that Sheerr was and has been at all times the owner of the machines. With the exception of two of them (a Spivy conveyor and a paint conveyor) they all appear on a list expressly agreed to by the Government as correct. Sheerr's claim to the two omitted from the list has not been challenged.
The only question here is as to the fair rental value of the machines. Expert testimony was taken upon this point and, although it is not as clear and satisfactory as it might be, I think it is sufficient to arrive at a figure of 2% Of the fair market value of the machines per month.
Naturally, it is not even suggested that the Government liens apply to these pieces of machinery since they are not and never were the property of Code Products.
Sally Sheerr -- Chattel Mortgage
The claimant, Sally Sheerr, received, at the time of the assignment of the mortgage on 4566 Baker Street to her from the Mutual Trust Life Insurance Company, an assignment of a chattel mortgage executed by the predecessor of Code Products in favor of Nicholas Lix. The lien of this chattel mortgage has been lost by the failure of the mortgagee to re-file it in accordance with the law of Pennsylvania. See opinion of this Court filed in this case, dated November 7, 1960.
Sally Sheerr claims that the interest on the $ 100,000 mortgage on 4566 Baker Street, accruing during the time of the receivership, is entitled to be treated as an administration expense, thus gaining for it the priority accorded administration expenses. This, in effect, would subject all of the assets of Code Products to the payment of the interest on a mortgage which covered but a single asset, namely, a piece of real estate. The interest due on the mortgage must take the same position as the lien of the mortgage itself and should not be accorded any different treatment than the principal of the mortgage. It is not a rent claim against the receiver and, if such treatment were allowed, I see no reason why any lienor could not come in and make the same claim.
An order in accordance with the foregoing may be submitted.