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Paradoxically, a Variational Autoencoder (VAE) could be pushed in two opposite directions, utilizing powerful decoder model for generating realistic images but collapsing the learned representation, or increasing regularization coefficient for disentangling representation but ultimately generating blurry examples. Existing methods narrow the issues to the rate-distortion trade-off between compression and reconstruction. We argue that a good reconstruction model does learn high capacity latents that encode more details, however, its use is hindered by two major issues: the prior is random noise which is completely detached from the posterior and allow no controllability in the generation; mean-field variational inference doesn't enforce hierarchy structure which makes the task of recombining those units into plausible novel output infeasible. As a result, we develop a system that learns a hierarchy of disentangled representation together with a mechanism for recombining the learned representation for generalization. This is achieved by introducing a minimal amount of inductive bias to learn controllable prior for the VAE. The idea is supported by here developed transitive information theory, that is, the mutual information between two target variables could alternately be maximized through the mutual information to the third variable, thus bypassing the rate-distortion bottleneck in VAE design. In particular, we show that our model, named SemafoVAE (inspired by the similar concept in computer science), could generate high-quality examples in a controllable manner, perform smooth traversals of the disentangled factors and intervention at a different level of representation hierarchy.