Megillah, Chapter 3, Mishnah 1. This chapter opens with the laws of the synagogue, and then moves on to the laws of the Torah reading. Our Mishnah discusses the sale of a synagogue and the sale of other items: what may be sold, and what is the status of the money received for them.
"Bnei ha'ir shemachru rechov ha'ir":
The residents of a town who sold the town's main street. And what sanctity could a street possibly have? According to our Mishnah the street does have sanctity, since, as we learned in the second chapter of Maseches Taanis, on Yom Kippur and on the final fast days decreed for rain the people would go out and pray in the town square. For this reason the Mishnah rules: "lokchin bedamav beis haknesses" - the proceeds of the sale may be used to purchase a synagogue, whose sanctity is greater than that of the street, since it is designated and dedicated for prayer.
It is worth noting that the Gemara explains that our Mishnah reflects an individual opinion. The Sages disagree and hold that since prayer takes place in the street only rarely, it has no status of sanctity at all, and therefore the proceeds of its sale may be used for any purpose whatsoever.
The ladder of levels of sanctity:
The Mishnah continues and lists the order of ascending in sanctity: for each item that is sold, an item of greater sanctity is purchased with the proceeds.
"Beis haknesses - lokchin teivah" - with the proceeds of the sale of a synagogue one may build an ark to house the Torah scroll.
"Teivah - lokchin mitpachos" - with the proceeds of the sale of the ark one may purchase mantles, the coverings of the Torah scrolls.
"Mitpachos - lokchin sefarim" - this refers to scrolls of Nevi'im and Kesuvim. Some say that Chumashim are included as well, provided that they are individual volumes and not all five books of the Torah together, for that is the subject of the next level.
"Sefarim - lokchin Torah" - with the proceeds of the sale of scrolls one may purchase a Torah scroll.
This is the place for an important note: the Gemara explains that the permission to sell a synagogue applies specifically to the synagogue of a village, which is not a place that people from everywhere visit. But in a large city, where many travelers come and go, the synagogue becomes the property of all of Israel, and the local residents have no right to sell it. Our Mishnah, which deals with the sale of a synagogue, is speaking of a village synagogue, which is considered the property of the village itself.
And in the reverse order - one does not descend in sanctity:
"Torah - lo yikchu sefarim" - one who sells a Torah scroll may not use the proceeds to purchase scrolls of a lower level.
"Sefarim - lo yikchu mitpachos" - the proceeds of the scrolls may not be used to purchase coverings for a Torah scroll.
"Mitpachos - lo yikchu teivah" - the proceeds of the mantles may not be used to purchase an ark.
"Teivah - lo yikchu beis haknesses" - the proceeds of the ark may not be used to purchase a synagogue, which is of a lower level.
"Beis haknesses - lo yikchu es harechov" - the proceeds of the synagogue may not be used to purchase the street, the open place in which people pray. Even though according to our Mishnah the street has sanctity, its sanctity is not equal to that of the synagogue.
"Vechein bemosreihen":
This law applies to leftover funds as well. Suppose an ark was sold and mantles were purchased with the proceeds, and money was left over, since the ark was sold for more than the value of the mantles. The status of the leftover funds is the same as the status of the original funds, and they may be used only to purchase something of equal or greater sanctity.
"Ein mochrin shel rabim leyachid":
One may not sell a synagogue belonging to the public to an individual, and some understand that the same applies to a Torah scroll belonging to the public. The reason - "mipnei shemoridin oso mikedushaso": the very fact that it no longer serves a large congregation lowers it from its level of sanctity. This is the opinion of Rabbi Yehudah, who distinguishes between a purchase by the public and lowering it into the domain of an individual.
"Amru lo":
The Sages answered him: if there is a distinction between the public and an individual, one would have to say correspondingly that a synagogue, or a Torah scroll, may not be transferred from a large city to a small city, since in the small city it will not serve so large a congregation. And since it is clear that the halachah is not so, there is no basis for Rabbi Yehudah's distinction either, that a synagogue of the public may not be turned into the synagogue of an individual.
In summary: in this Mishnah we learned the ladder of levels of sanctity - the town street, the synagogue, the ark, the mantles, the scrolls and the Torah scroll - and that one may ascend in sanctity but may not descend, both with the proceeds of the sale themselves and with the leftover funds. We also learned that the permission to sell a synagogue applies in a village and not in a large city, and the dispute between Rabbi Yehudah and the Sages regarding selling property of the public to an individual.
Later in the chapter we will move on to the laws of the Torah reading.