IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

NAVIENT SOLUTIONS, LLC,

Plaintiff/Counterclaim 

Defendant,

v.

BPG OFFICE PARTNERS XIII IRON 

HILL LLC; OFFICE PARTNERS XIII 

IRON HILL LLC,

Defendants/Counterclaim 

Plaintiffs.

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C.A. No.: N20C-04-005 KMM

Date submitted: January 24, 2024

Date decided: April 22, 2024

OPINION

Non-Party Intervenor BVFL I FI LLC’s Motion to Quash Plaintiff’s Writ of 

Attachment Fieri Facias: GRANTED in part

R. Karl Hill, Esq. (argued), Seitz, Van Ogtrop & Green, P.A., Wilmington,

Delaware, Attorney for Plaintiff/Counterclaim Defendant Navient Solutions, LLC.

Jeffrey M. Weiner, Esq., Law Offices of Jeffrey M. Weiner, Wilmington, 

Delaware, Attorney for Defendants/Counterclaim Plaintiffs BPG Office Partners 

XIII Iron Hill LLC and Office Partners XIII Iron Hill LLC.

Michael V. DiPietro, Esq., Christina B. Vavala, Esq., Polsinelli PC, Wilmington, 

Delaware; Bradley R. Gardner, Esq., (pro hac vice) (argued), Abigail E. Williams, 

Esq. (pro hac vice), Polsinelli PC, Kansas City, Missouri, Attorneys for Intervenor 

BVFL I FI LLC.

MILLER, J
1

I. Introduction

Defendants BPG Office Partners XIII Iron Hill LLC and Office Partners XIII 

Iron Hill LLC (together, “BPG”) are the owners of a commercial building and 

borrowers under loan documents with BVFL I FI LLC (“Lender”). Navient 

Solutions, LLC (“Navient”) was a tenant in the building. After Navient left the 

premises, it initiated this action to collect money owed to it by BPG under the lease. 

After Navient obtained a judgment, it caused writs of garnishment to be served 

on the tenants in the building to attempt to collect on its judgment. Lender, which 

has a prior perfected security interest in the property and the rents, intervened and 

moved to quash the writs based on its priority status as a secured creditor.

While acknowledging that Lender has a prior perfected lien, Navient argues 

that a default has not occurred and therefore, Lender has no right to the rents and 

thus, no basis to quash the writs. Alternatively, if a default has occurred, Navient 

argues that Lender must do more than just declare a default in order to preserve its 

priority status. Relying on cases from Florida and Illinois, Navient asserts that

because Lender did not take steps to exercise it rights and remedies after the 

judgment was entered, it cannot prevent the funds from being garnished.

Lender responds that a default has occurred and while it is not required to do 

anything more to preserve its priority status, it did, in fact, do more. Among other 

things, it declared a default and accelerated the balance of the loan. Relying on a 
2

case from Michigan, Lender asserts that its collateral cannot be garnished and it is 

not required to take any steps to preserve its priority rights.

The line of cases relied on by Navient adopt what is known as the “use-it-orlose-it” approach. Under this theory, if, after a default, a secured creditor does not 

take steps to enforce its rights prior to service of writs of garnishment, the lien 

creditor will prime the secured creditor. Courts that have followed this approach 

essentially find a constructive waiver by the secured creditor’s inaction.

The counter approach is known as “trace and recapture.” Under this theory, 

a secured creditor does not waive its priority status merely by inaction after a default 

occurs. If, after a default, the secured creditor takes no action to enforce its remedies 

and a writ of garnishment is served, the funds may properly be delivered to the lien 

creditor. However, the garnished funds are subject to the secured creditor’s interest 

and when the secured creditor decides to enforce its remedies, it may “recapture” the 

funds from the lien creditor.

No Delaware case has addressed whether a secured party must, after a default,

take action to preserve its priority status in the face of a junior creditor attaching its 

collateral. Thus, it is an issue of first impression in Delaware. The Court finds that 

the trace and recapture approach is consistent with the rights that attach when a writ 

of garnishment is served, the policies and provisions of the Uniform Commercial 

Code (the “UCC”), the terms of the loan documents between Lender and BPG, and 
3

Delaware’s policy of freedom of contract. Thus, a secured party is not required to 

exercise its rights and remedies after a default to preserve its priority status.

As detailed below, a default occurred before Navient’s writs of garnishment 

were served. While Lender did not immediately take affirmative steps to collect on 

its collateral, it did not need to do so to preserve its priority status. In any event, 

Lender did take steps to enforce its rights before the writs were served. Lender 

declared a default, accelerated the loan, and expressly revoked BPG’s license to the 

rents. 

Navient requests that if Lender is found to have a priority status, the Court 

quash the writs only to the extent necessary to allow BPG to satisfy its monthly loan 

and operating expense obligations. Because there is no legal basis for the Court to 

do so, this request is denied.

Lender does not object to the writs remaining outstanding as long as they are 

declared to be junior to Lender’s rights. Accordingly, the Court declares that Lender 

holds a priority status and Navient’s writs are junior to Lender’s rights. Therefore, 

the Motion to Quash is Granted in part.

Finally, Navient has reason to believe that its rights as a lien creditor are being 

impaired. Navient may use post-judgment discovery tools to determine whether its 

rights are being impaired. Navient does not need leave to engage in such discovery. 
4

II. Factual Background

A. Navient obtains a judgment against BPG.

1

BPG owns the commercial property known as Iron Hill Corporate Center (the 

“Property”), located in New Castle County, Delaware.

2

 Navient was a tenant at the 

Property pursuant to a November 20, 2012 lease (the “Lease”) with BPG.3 Pursuant 

to the terms of the Lease, Navient was responsible for maintenance, repair, and 

replacement of certain Building Systems.4 Such costs were to be amortized over the 

useful life of the system. Navient was to “receive an amount from [BPG] at the 

expiration . . . of the Lease equal to the then-remaining unamortized cost of such 

Replacement Item ....”5 

The Lease expired on February 29, 2020 and Navient vacated the premises.6 

Navient demanded $503,882.72 from BPG for the unamortized cost of the cooling 

tower Navient replaced in 2019.7 When BPG failed to pay, Navient instituted this 

action. BPG asserted a counterclaim, alleging breach of the Lease based on

Navient’s alleged failure to maintain other components of the leased space.8

1 A detailed recitation of the facts is set forth in this Court’s post-trial opinion in Navient Solutions, 

LLC v. BPG Office Partners XIII Iron Hill LLC, 2023 WL 3120644 (Del. Super. Apr. 27, 2023). 

The factual background in this decision will be limited to facts relevant to the pending motion.

2

Id., at *1.

3

Id.

4

Id., at *2.

5

Id., at *4.

6

Id.

7

Id.

8 Specifically: (1) a transformer, (2) heat pumps, (3) rooftop fresh air units, and (4) elevators. Id., 

at *4-8.
5

A three-day bench trial was held in May 2022. Pre-trial, BPG conceded that 

it owed Navient the amount demanded for the unamortized cost of a cooling tower. 

Thus, the trial was to resolve BPG’s counterclaim and any offset.

9

On April 27, 2023, the Court issued its Post-Trial Memorandum Opinion 

finding for BPG on two of the four asserted breaches.

10

 The Court offset the amount 

owed to BPG ($79,650) and entered Final Judgment on May 9, 2023 in favor of 

Navient in the amount of $424,172.72, plus interest and attorneys’ fees for a total of 

$839,034.60 (the “Final Judgment”).

11

 Navient’s Final Judgment automatically 

placed a lien on the Property.12

B. Navient garnishes rents at the Property.

Navient conducted discovery in aid of execution on its judgment. On August 

30, 2023, it issued praecipes for writs of attachment fieri facias for service on 

nineteen of the then-current tenants at the Property to garnish the rent owed to 

BPG.

13

 The writs issued on September 7, 202314 and thirteen tenant-garnishees were 

served on September 19, 2023 and two more were served on November 1, 2023.

15

9

Id., at *8.

10 Id., at *17.

11 D.I. 67.

12 See 10 Del. C. § 4701, et seq.

13 D.I. 71-89.

14 D.I. 90-107.

15 DI. 110-128; 146-147. The garnishees’ time to respond to the writs has been extended until 

resolution of the motion to quash.
6

C. BPG and Lender enter into the Loan Documents.

In October 2017, pursuant to a Loan Agreement, Promissory Note, Mortgage, 

Assignment of Leases and Rents, and Security Agreement and Fixture Filing

(collectively and as amended, the “Loan Documents”), BPG granted a mortgage on 

the Property and an assignment of rents, among other things, to Lender.16 The Loan 

Documents granted BPG a license in the rents, which would automatically be 

revoked upon an Event of Default.17 On October 18, 2017, the relevant Loan 

Documents were filed in the New Castle County Recorder’s Office and a UCC 

Financing Statement was filed.

Section 8.1 of the Loan Agreement provides an “Event of Default” occurs, 

relevant here, when “(h) Borrower breaches any covenant contained in Sections ...

5.22, ... [or] 5.27 ....”18 

Section 5.22 provides:

Indebtedness. Borrower shall not directly or indirectly create, incur or 

assume any indebtedness other than the (i) Debt and (ii) unsecured trade 

payables incurred in the ordinary course of business relating to the 

ownership and operation of the Property . . . that (A) are not evidenced 

by a note, (B) do not exceed, at any time, a maximum aggregate amount 

of 1% of the original amount of the Principal and (C) are paid within 

sixty (60) days of the date incurred to the extent sufficient cash flow 

exists to pay the same (collectively, “Permitted Indebtedness”)....

19

16 D.I. 133, Exs. 1-3.

17 D.I. 133, Ex. 3 (Loan Agreement), § 2.(a).

18 Loan Agreement, § 8.1.

19 Id., § 5.22 (emphasis in original). 
7

“Indebtedness” is not defined in the Loan Agreement. 

Section 5.27 provides:

Liens. Without Lender’s prior written consent, Borrower shall not 

create, incur, assume, permit or suffer to exist any Lien on all or any 

portion of the Property . . . , except Liens in favor of Lender and 

Permitted Encumbrances,20 unless such Lien is bonded, insured over 

with title insurance, discharged or otherwise removed in accordance 

with Delaware law within 60 days after the earlier of (i) Borrower first 

receives notice of such Lien or (ii) the date the lien is filed.21

The term “Lien” is defined in the Loan Agreement as:

any mortgage, deed of trust, lien (statutory or otherwise), pledge, 

hypothecation, easement, restrictive covenant, preference, assignment, 

security interest or any other encumbrance, charge or transfer of . . . , 

on or affecting all or any part of the Property . . . , including any 

conditional sale or other title retention agreement, any financing lease 

having substantially the same economic effect as any of the foregoing, 

the filing of any financing statement, and mechanic’s, materialmen’s 

and other similar liens and encumbrances constituting a lien against real 

property.22

Upon the occurrence of an Event of Default, Section 8.2.1 of the Loan 

Agreement provides that “Lender may take such action, without notice or demand, 

that Lender deems advisable to protect and enforce its rights against [BPG] and in 

and to the Property; including declaring the Debt to be immediately due and payable 

... without notice or demand...”23

20 “Permitted Encumbrances” is defined to include liens “as Lender approves in writing in Lender’s 

reasonable discretion.” Loan Agreement, § 1.1.

21 Id., § 5.27 (emphasis in original).

22 Id., § 1.1.

23 Id., § 8.2.1 (emphasis added).
8

Section 8.2.2 describes the rights and remedies available to Lender upon an 

Event of Default:

Upon the occurrence of an Event of Default, all or any one or more of 

the rights, powers, privileges and other remedies available to Lender 

against Borrower under the Loan Documents or at law or in equity may 

be exercised by Lender at any time and from time to time, whether or 

not all or any of the Debt shall be declared, or be automatically, due and 

payable, and whether or not Lender shall have commenced any 

foreclosure proceeding or other action for the enforcement of its rights 

and remedies under any of the Loan Documents. Any such actions 

taken by Lender shall be cumulative and concurrent and may be 

pursued independently, singly, successively, together or otherwise, at 

such time and in such order as Lender may determine in its discretion, 

to the fullest extent permitted by law, without impairing or otherwise 

affecting the other rights and remedies of Lender permitted by law, 

equity or contract or as set forth in the Loan Documents.... (emphasis 

added).24

Under Section 8.2.4, delay or failure to exercise a right does not constitute a 

waiver:

No delay or omission to exercise any remedy, right or power accruing 

upon an Event of Default, or the granting of any indulgence or 

compromise by Lender shall impair any such remedy, right or power 

hereunder or be construed as a waiver thereof, but any such remedy, 

right or power may be exercised from time to time and as often as may 

be deemed expedient. A waiver of one . . . Event of Default shall not be 

construed to be a waiver of any subsequent ... Event of Default or to 

impair any remedy, right or power consequent thereon....

25

24 Id., § 8.2.2 (emphasis added).

25 Id., § 8.2.4 (emphasis added).
9

D. Lender declares a default and accelerates the loan.

Lender was aware of the Navient Lease and the underlying litigation between 

Navient and BPG.26 The July 2020 amendment to the Loan Agreement included a 

definition of “Navient Lawsuit,” which described this litigation. There were also 

communications between BPG and Lender relating to BPG pursing the litigation and 

a potential “handoff” of the Property to Lender. Later amendments also referenced 

this action. 

Despite being aware of the litigation, Lender took no action at the time the 

Final Judgment was entered. Rather, it waited until September 11, 2023 (after the 

writs were issued and the day before it moved to intervene), to send a notice of 

default to BPG.

27

 Lender notified BPG that because of the Navient judgment, BPG

“has (i) incurred indebtedness other than the Debt or unsecured trade payables and 

(ii) permitted a judgment lien to exist on the Property without Lender’s prior written 

consent.”28 Therefore, Lender accelerated the debt owed under the Note and 

demanded “immediate payment, in full, of all amounts owed under the Note and 

other Loan Documents.”29 Lender also expressly revoked BPG’s license to “deal 

with and enjoy the Rents.”30

26 The Navient Lease is specifically defined in the Loan Documents and referenced throughout.

27 D.I. 162.

28 D.I. 162, p. 2.

29 Id.

30 Id.
10

E. Lender moves to intervene and files the Motion to Quash.

After the writs were issued, Lender moved to intervene in this action on 

September 12, 2023, which was granted on October 3, 2023.

31

 Lender filed the

Motion to Quash on October 3, 2023,

32 asserting that it held a first priority lien on 

the Property and in the rents, and therefore, Navient’s subsequent writs of 

garnishment should be quashed.

After the Motion to Quash was fully briefed, the Court held oral argument on 

November 2, 2023,33 during which the Court requested supplemental briefing. The 

Court permitted Navient to conduct limited document discovery related to an alleged 

Event of Default under the Loan Agreement. Following receipt of the parties’ 

supplemental briefing, the Court held a second hearing on January 24, 2024.34

III. The Parties’ Contentions

While there are many disputes between Navient and Lender, some points are 

not in dispute.35 There is no dispute that: (i) Lender has a perfected lien on the 

Property and in the rents; (ii) Lender’s lien is prior in time to service of the writs of 

garnishment; (iii) the Loan Documents between BPG and Lender are valid and 

enforceable; (iv) the writs of garnishment were issued before Lender declared a 

31 D.I. 108, 132.

32 D.I. 133.

33 D.I. 145.

34 D.I. 165.

35 BPG has taken no position on the Motion to Quash.
11

default and accelerated the Note; and, (v) the writs of garnishment were properly 

issued and served.

Relying on System Soft Technologies, L.L.C. v. Artemis Technologies, Inc., 

Lender argues that because it has a valid, prior perfected lien on the Property and in 

the rents, the rents cannot be subject to garnishment.36 Thus, it asserts that the writs 

of garnishment should be quashed.

Navient first challenges whether an Event of Default occurred under the Loan 

Documents because “judgment” is not used in any of the Loan Documents and so it 

is not identified as an Event of Default. Thus, Navient says, it is unclear whether 

the Final Judgment triggered a default. 

Next, Navient asserts that because the Lease is defined in the Loan 

Documents, and referenced throughout, Lender consented to the terms of the Lease, 

including the obligation to reimburse Navient for the remaining unamortized cost of 

replaced systems. Therefore, Lender consented the reimbursement and it is either a 

Permitted Encumbrance (under § 5.27) or Permitted Indebtedness (under § 5.22) as 

a trade payable.

36 Lender initially challenged Navient’s standing to contest Lender’s declaration of an Event of 

Default and acceleration of the loan, as Navient is not a party to the Loan Documents or a thirdparty beneficiary. However, Navient is not mounting such a challenge and Lender conceded that 

Navient has standing to challenge Lender’s arguments in support of the Motion to Quash. 

Accordingly, the Court need not address the standing arguments.
12

Navient, relying on American Home Assurance Co. v. Weaver Aggregate 

Transportation, Inc., S.E.I.U. Local No. 4 Pension Fund v. Pinnacle Health Care of 

Berwyn LLC, and One CW, LLC v. Cartridge World N. Am, LLC, asserts that even 

if a default occurred, Lender must take some remedial steps to enforce its rights in 

order to defeat the writs. Navient points to the fact that “Lender took no action to 

declare a default until months after the judgment was entered and only after it learned 

of the writs.”37 This, according to Navient, is not sufficient to preserve Lender’s 

senior status and Navient may properly garnish the rents.

Navient also argues that the Property is still being operated as a going concern 

and that the rents being collected are sufficient to cover BPG’s monthly loan 

obligation and operating expenses. Therefore, if the Court determines that Lender 

properly declared a default, Navient asks that the writs be quashed only to the extent 

necessary to pay the loan and related expenses, thereby leaving the remaining 

monthly proceeds to be applied to the Final Judgment.

38

Finally, Navient believes that unsecured creditors are being paid from the 

rents in violation of its rights as a lien creditor. Therefore, it requests leave to take 

additional discovery. 

37 D.I. 158, p. 12.

38 Id.
13

IV. Analysis

A. Did an Event of Default occur?

1. Was the Final Judgment a Permitted Indebtedness?

Under the Loan Agreement, an Event of Default occurs when BPG incurs 

“any indebtedness” other than, relevant here, “unsecured trade payables incurred in 

the ordinary course of business relating to the ownership and operation of the 

Property” and which “are paid within sixty (60) days of the date incurred to the 

extent sufficient cash flow exists to pay the same ([a] ‘Permitted Indebtedness’).”39 

Navient questions whether a “judgment” is an “indebtedness” as neither term is 

defined in the Loan Documents. In the alternative, it argues that the Final Judgment

was a trade payable which was not paid within 60 days because BPG did not have 

sufficient cash flow to satisfy the Final Judgment and therefore, it constitutes a 

Permitted Indebtedness and thus, was not an Event of Default.

40

“Indebtedness” is not defined in the Loan Agreement. “Judgment” is neither 

defined nor used in the Loan Agreement. A term that is not otherwise defined is to 

be given its ordinary meaning.41 “Indebtedness” means “1. the condition of being 

39 Loan Agreement, § 5.22.

40 Navient bases the lack of sufficient funds on the BPG’s disclosure that the rents are its only cash 

flow, and the monthly collections are generally around $400,000. BPG also disclosed that its 

monthly loan payment is approximately $120,000 and monthly operating expenses are 

approximately $200,000.

41 Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006).
14

indebted. 2. something (such as an amount of money) that is owed.”42 Indebted 

means “owing money.”

43

 “Judgment” means “an obligation (such as a debt) created 

by the decree of a court.44 Thus, a judgment (owing a debt) falls within the plain 

meaning of “indebtedness.”

“Trade payable” is also not defined in the Loan Agreement. A trade payable 

commonly means an expense a business incurs for the purchase of goods or services 

from a trade creditor.

45

 In contrast, a capital expense is an expense made by a 

business that provides a long-term benefit.46 The Final Judgment arises out of an 

obligation to reimburse Navient for the replacement of a Building System, i.e., a 

cooling tower. Navient was not a trade creditor. The expense reimbursement does 

not fall within the category of a trade payable, and thus, the Final Judgment is not a 

Permitted Indebtedness.

Because the Final Judgment was not a Permitted Indebtedness, it was an 

indebtedness incurred in violation of Section 5.22 of the Loan Agreement. 

2. Was the Final Judgment a Permitted Encumbrance under 

Section 5.27?

42 https://www.merriam-webster.com/dictionary/indebtedness. 

43 https://www.merriam-webster.com/dictionary/indebted. 

44 https://www.merriam-webster.com/dictionary/judgment. 

45 See In re Nutritional Sourcing Corp. 398 B.R. 816, 826-27 (D. Del. Bankr. 2008) (recognizing 

that “trade creditor” is so commonplace that court define it similarly to mean someone who 

provides goods or services in the ordinary course of business).

46 See https://www.merriam-webster.com/dictionary/expense#legalDictionary. 
15

Under the Loan Agreement, an Event of Default also occurs when a Lien is 

imposed on the Property without Lender’s prior written consent, unless such Lien is 

discharged or removed within 60 days “after the earlier of (i) Borrower first receives 

notice of such Lien or (ii) the date the lien is filed.”

47 Here, upon entry of the Final 

Judgment, a lien automatically attached to the Property. There is no dispute that this 

lien was not satisfied within 60 days.48 

Even if the Final Judgment alone did not constitute an Event of Default (as a 

Permitted Indebtedness), the automatic lien on the Property which remained 

unsatisfied for 60 days falls squarely within Section 5.27 of the Loan Agreement

(“Liens” defined to include liens (statutory or otherwise)).

49

 Thus, an Event of 

Default occurred by July 9, 2023.

Navient makes a facially appealing argument that because Lender approved 

the form of lease and clearly knew of the Navient Lease and the litigation, Lender 

should be deemed to have consented to BPG’s obligation to reimburse Navient, and 

as a result, consented to the Final Judgment. Thus, Section 5.27 was not triggered.

50

 

47 Loan Agreement, §§ 8.1, 5.22.

48 In the circumstances here, the date BPG received notice of the lien and the lien being “filed” are 

the same date as BPG knew the Final Judgment was entered on May 9, 2023 and the lien 

automatically attached at that time.

49 Loan Agreement, § 1.1.

50 Loan Agreement, § 5.27 (“Without Lender’s prior written consent, Borrower shall not . . . permit 

or suffer to exist any Lien ....”).
16

Not only was the Navient Lease defined in the Loan Agreement, Lender was 

fully aware of what was at stake in the litigation and the potential outcomes. 

Schedule 3 to the Third Amendment to the Loan Agreement describes this litigation 

in detail, including the amount of Navient’s claim and BPG’s counterclaim.51 

Apparently, the hope was that the counterclaim would be successful, which would 

have eliminated the amount owed to Navient by an offset.52

Navient has not had a full opportunity to explore through discovery whether 

Lender’s actions prior to entry of the Final Judgment amounted to consent. 

However, assuming that the evidence could be developed to support the conclusion 

that Lender was deemed to have consented to the Final Judgment when it was 

entered, on September 11, 2023, Lender declared a default under Section 5.22 (due 

to an indebtedness being incurred which was not a Permitted Indebtedness) and 

Section 5.27 (due to entry of the Final Judgment and the resulting lien on the 

Property).

53

 Lender also accelerated the loan and expressly revoked BPG’s license 

to the rents.54 Lender had discretion to determine when and how to exercise its rights 

and remedies. Thus, even if the Lender previously consented to the judgment and 

lien, it is clear that as of September 11, 2023, it no longer consented. This

51 D.I. 158, Ex. D, Schedule 3.

52 See, Id., Ex. E (BPG covenanting to continue to use its best efforts to pursue the counterclaim).

53 D.I. 162.

54 Id.
17

declaration of default occurred before the writs were served on September 19, 2023

(or later). Thus, the automatic lien on the Property resulted in an Event of Default 

either as of July 9 or as of the declaration of default on September 11, 2023.

B. Was Lender required to do more?

1. Delaware garnishment law

The starting point to determine the relative rights of Lender and Navient is to 

understand the nature and rights under Delaware garnishment law. “Garnishment is 

a legal device that enables ‘a judgment creditor to satisfy an underlying judgment by 

reaching assets, property, [or] money ... of a judgment debtor in the possession of, 

or under the control of, a third person or party, called a garnishee.’”

55

 A garnishment 

is initiated by the issuance of a writ of fieri facias (also known as a writ of fi. fa.). 

The writ is served on the person or entity in possession of the defendant’s property. 

When the writ is served, the effect “is to bind the property of the defendant so 

attached, from the time of laying the attachment. The property so attached is bound 

in the hands of the garnishee until answer is made by him....”56

A garnishment differs in 

no essential respect from a levy excepting that the plaintiff does not 

acquire a clear and full lien upon the specific property in the garnishee’s 

possession, but only such a lien or claim as gives him the right to hold 

55 J.G. Wentworth SSC Ltd. P’ship v. Crawford, 2002 WL 449701, at *1 (Del. Super. Mar. 21, 

2002) (citing 30 AM.Jur.2d Executions, Etc. § 644 (1994)).

56 2 Woolley, Delaware Practice § 1165 (1985 version).
18

the garnishee personally liable for it ... and to restrain the garnishee 

from paying the debt to the defendant.57 

The judgment creditor, however, gains no more rights in the property attached than 

that of the judgment debtor. Indeed:

The right of such creditor to recover from the garnishee depends upon 

the subsisting rights between the garnishee and the debtor in the 

attachment; and the test of the garnishee’s liability is that he has funds, 

property or credits in his hands belonging to the debtor, for which the 

latter would have a right to sue. The garnishee stands in every respect 

in the same position as if the suit had been brought by his own creditor.

When a debt is due from a garnishee to a judgment debtor by virtue of 

an agreement existing between them, the garnishee is entitled to avail 

himself of all the defenses that could be made against the party to whom 

the debt is owing and with whom the contract was made.58

Thus, if the judgment debtor cannot compel the third party “to pay money ... 

to him in an action at law, his creditor has no greater claim by way of garnishment 

against that third party.”59

2. Relevant Article 9 provisions and Delaware policy

Under Article 9, generally the first creditor to perfect its interest in the 

collateral has priority over other secured creditors.60 A judgment creditor is not a 

secured creditor under Article 9, but rather, is a “lien creditor.”61 The priority of a 

secured creditor and a lien creditor is addressed in Section 9-317: “A security interest 

57 Id., § 1189.

58 Id., § 1190.

59 Wilm. Trust Co. v. Barron, 470 A.2d 257, 264 (Del. 1983).

60 See 6 Del. C. § 9-322(a)(1); see also WSFS v. Chillibilly’s, Inc., 2005 WL 730060, at *4 (Del. 

Super. Mar. 30, 2005).

61 6 Del. C. § 9-102(a)(52) (defining a lien creditor as “a creditor that has acquired a lien on the 

property involved by attachment, levy, or the like....”).
19

... is subordinate to the rights of: ... a person that becomes a lien creditor before ...

the time: (A) the security interest ... is perfected.”

62

 Thus, a prior perfected secured 

creditor has priority over a later lien creditor.

Section 9-601 provides that: “[a]fter default, a secured party has the rights 

provided in this part and, ... those provided by agreement of the parties. A secured 

party: (1) may reduce a claim to judgment, foreclose, or otherwise enforce the claim

[or] security interest, ... by any available judicial procedure.”

63

 Official Comment 

3 to Section 9-601 states: “This Article does not determine whether a secured party’s 

post-default conduct can constitute a waiver of default in the face of an agreement 

stating that such conduct shall not constitute a waiver. Rather, it continues to leave 

to the parties’ agreement, as supplemented by law other than this Article, the 

determination whether a default has occurred or has been waived.”

64

Finally, Section 9-610 addresses disposition of collateral after default. “After 

default, a secured party may sell, lease, license, or otherwise dispose of any or all of 

the collateral....”

65 Official Comment 5 to Section 9-610 provides: “the disposition

[of collateral] by a junior [secured creditor does] not cut off a senior [creditor’s]

security interest... [Rather, the] senior security interest is entitled, by virtue of its 

62 Id., § 9-317(a)(2).

63 Id., § 9-601(a) (emphasis added).

64 Id., § 9-601, cmt. 3.

65 Id., § 9-610(a) (emphasis added).
20

priority, to take possession of collateral from the junior secured party and conduct 

its own disposition, provided that the senior enjoys the right to take possession of 

the collateral from the debtor.”

66

Delaware has a strong public policy of freedom of contract, which 

enables sophisticated counterparties to contract as they wish and her 

courts are loath to disturb bilaterally-negotiated terms. Procontractarian, Delaware law in general recognizes that the value of 

contracts is maximized by enforcing them as written [and that] little 

value can come of a promise that can be avoided upon the remorse of 

the maker thereof. Indeed, Delaware law promotes voluntary business 

arrangements as a matter of fundamental public policy.67 

The policy of the UCC is to “simplify, clarify, and modernize the law 

governing commercial transactions [and to] permit the continued expansion of 

commercial practices through custom, usage, and agreement of the parties.”68 

Delaware has recognized that the UCC enables parties to craft “contractual 

arrangements that generate wealth and the investment of capital in commercial 

enterprise because parties are able to rely on a clear and predictable set of rules to 

govern their transactions.”69 

66 Id., § 9-610, cmt. 5.

67 Unbound Partners Ltd. P’ship v. Invoy Holdings Inc., 251 A.3d 1016, 1031–32 (Del. Super. 

2021) (cleaned up).

68 6 Del. C. § 1-103.

69 Off. Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A., 

103 A.3d 1010, 1017 (Del. 2014).
21

3. Cases relied upon by the parties.

Navient relies upon:

American Home Assurance Co. v. Weaver Aggregate Transport, Inc.

70 After 

plaintiff obtained a judgment against Weaver Aggregate Transport, Inc.

(“Weaver”),

71 Weaver entered into loan agreements with The Farmers and 

Mechanics Bank (the “Bank”).72 Five months later, plaintiff served writs of 

garnishment on the Bank. The Bank moved to quash asserting that it had a right of 

setoff because, relevant here, (1) it had a perfected security interest in Weaver’s bank 

account; and (2) that the loan was in default upon service of the writs on the Bank.73

The court found that the Bank had a perfected security interest in Weaver’s 

deposit account.74 However, under Illinois law a bank with a perfected security 

interest must “show that it declared the loan in default and took affirmative steps 

thereafter to enforce its rights.”75

The court found that the Bank had not established that the loans were in 

default at the time the writs were served. The evidence showed that as of the date 

the writs were served, there had been no monetary defaults and the Bank did not 

declare a non-monetary default until after the writs were served. The court rejected 

70 84 F.Supp.3d 1314 (M.D. Fla. 2015).

71 Id., at 1321.

72 Id., at 1318.

73 Id.

74 Id., at 1320.

75 Id.
22

the Bank’s argument that service of the writs effected a default because the Bank did 

not have a right of setoff (because it had not declared a default) just prior to the 

moment the writs were served and therefore, the writs “primed” the Bank’s right of 

setoff.76

Finally, the court addressed whether the Bank’s prior perfected security 

interest trumped the writs, despite no default occurring before the writs were served. 

Relying primarily on S.E.I.U. and One CW the court ruled that the loan agreement 

did not give the Bank the right to seize control of the collateral until a default had 

occurred.77 Relying on Frierson v. United Farm Agency, Inc., the court ruled that 

the Bank’s security interest did not give it priority over the judgment creditor 

because the Bank had not taken steps to enforce its rights under its loan documents 

or the UCC prior to service of the writs.78 Therefore, the court held that the Bank 

did not have a right of setoff.

S.E.I.U. Local No. 4 Pension Fund v. Pinnacle Health Care of Berwyn 

LLC.

79 Plaintiff obtained a judgment against Pinnacle Health Care of Berwyn LLC

(“Pinnacle”), resulting in a judgment lien. Premier Bancorp (“Premier”) held a prior 

perfected security interest in Pinnacle’s assets. At issue were funds owed to Pinnacle 

76 Id., at 1324.

77 Id., at 1325-26.

78 Id., at 1326.

79 560 F.Supp.2d 647 (N.D. Ill. 2008).
23

from a third-party, which Premier asserted were covered by its security interest. 

Under the security agreement, Premier could exercise rights over the collateral only 

after a default.80 Relying on Frierson, the court ruled that although Premier had a 

prior perfected security interest (and Pinnacle technically defaulted), because 

Premier did not declare the loan in default or follow the procedures required by the 

security agreement to enforce its UCC and contractual rights, it did not have a 

present right to the funds, and accordingly, the court released the funds to plaintiff.81

One CW, LLC v. Cartridge World North America, LLC.

82

 Plaintiff obtained 

a judgment against Cartridge World Midwest, LLC (“Midwest”) and served a writ 

of garnishment on Signature Bank, where Midwest had funds on deposit.83 

Signature Bank had a prior perfected security interest in Midwest assets, including 

the funds in the bank account.84 The loan documents contained the same provisions 

as the security agreement in S.E.I.U.

85 On the day the writ was served, Signature 

80 Id., at 650 (“Until default and except as otherwise provided below with respect to accounts, 

[Pinnacle] may have possession” of the collateral. “If an Event of Default occurs under this 

Agreement, at any time thereafter, [Premier] shall have all the rights of a secured party under the 

Illinois Uniform Commercial Code. In addition and without limitation, Lender may exercise any 

one or more of the following rights and remedies: [list includes acceleration of the debt, obtain 

deficiency judgment, among others].”).

81 Id., at 651.

82 661 F.Supp.2d 931 (N.D. Ill. 2009).

83 Id., at 933.

84 Id.

85 Id., at 934.
24

Bank declared a default, but took no action under the documents to enforce its 

rights.86 

Following the reasoning in S.E.I.U. and Frierson, the court ruled that 

Signature Bank had no present right to possess the funds at issue and because it 

failed to exercise its rights, it had no grounds to object to the release of the funds to 

plaintiff. 

Frierson v. United Farm Agency, Inc.

87 Merchants bank held a perfected 

possessory security interest in United Farm Agency, Inc.’s (“UFA”) bank account at 

Merchants and a security interest in UFA’s funds held in two other banks.88 After 

obtaining a judgment against UFA, plaintiff served a writ of garnishment on the three 

banks. Merchants moved to quash, asserting that it had a right to setoff (with respect 

its own account) pursuant to the loan agreement with UFA, and that it held a prior 

perfected security interest in the funds in the accounts at the other two banks.89 

Under Missouri law, “a bank need not take steps to effect a setoff prior to 

garnishment, but only must show that a default existed.”

90

The loan agreement between Merchants and UFA provided that an event of 

default occurs when UFA fails to discharge a judgment within thirty days of its entry. 

86 Id., at 935.

87 868 F.2d 302 (8th Cir. 1989).

88 Id., at 303.

89 Id.

90 Id. at 304 (“[A] bank cannot ... defeat a garnishment on the ground that the depositor owes the 

bank money on a note not yet due.”) (citation omitted).
25

This thirty-day period expired long before the writs were served.91 Accordingly, on 

appeal, the court ruled that Merchants had the right to setoff before the writ attached 

and therefore, the writ served on Merchants should have been quashed.92

The court next determined the impact of Merchants’ prior perfected security 

interest under Article 9 in the funds in the other two banks. Agreeing with the district 

court, the Eight Circuit said:

If a secured creditor with a security interest over all the debtor’s 

property is permitted to rely on a default, whether technical or not, to 

prevent another creditor from executing on the debtor’s property, while 

treating the loan as not in default when dealing with the debtor and 

others, severe inequities would result. * * * Such an approach would be 

against both the spirit and the letter of the Uniform Commercial Code.93

***

Merchants cannot refuse to exercise its rights under the security 

agreement, thereby maintaining [the debtor] as a going concern, while 

it impairs the status of other creditors by preventing them from 

exercising valid liens. Allowing Merchants to [refuse to enforce its 

rights and prevent other creditors with valid liens from exercising their 

rights] would fly in the face of all Article 9, which is premised on the 

debtor’s ability to exercise rights in the property.... Article 9 requires 

that [plaintiff] take the remaining funds subject to Merchants’ security 

interest if the bank refuses to exercise its remedies under the code....

Merchants’ security interest in the funds will continue, and Merchants 

can trace and recapture when it chooses to declare the loan in default 

and accelerate the debt. 94

91 Id.

92 Id.

93 Id., at 304-05.

94 Id., at 305.
26

The appeals court remanded, directing the lower court to quash the writ served 

on Merchants. The writs served on the other banks were found to be valid and thus, 

not quashed. However, funds plaintiff received from these writs were taken “subject 

to Merchants’ security interest.”95

Lender relies upon:

System Soft Technologies, L.L.C. v. Artemis Technologies, Inc.

96 After 

obtaining a judgment against Artemis Technologies, Inc. (“Artemis”), plaintiff 

served writs of garnishment on Artemis’ customers.97 Summit Community Bank 

(“Summit”) held a prior perfected security interest in Artemis’ assets and moved to 

quash the writs. Prior to service of the writs, Summit had declared a default and 

accelerated the loans.98 Summit also entered into a forbearance agreement with 

Artemis, pursuant to which Artemis would continue to operate and make payments 

on the amount owed to Summit.99 After the lower court quashed the writs, plaintiff 

appealed.

On appeal, plaintiff did not dispute Summit’s prior perfected security interest, 

but argued that Summit was required to foreclose on Artemis’ assets in order to 

prevent plaintiff from collecting on its debt.100 The court noted that under Article 9, 

95 Id. (emphasis added)

96 301 Mich. App. 642 (Mich. Ct. App. 2013).

97 Id., at 646.

98 Id.

99 Id., at 652-53.

100 Id., at 650.
27

a secured party “[m]ay reduce a claim to judgment, foreclose, or otherwise enforce 

the claim, security interest, or agricultural lien by any available judicial 

procedure.”

101

 “A secured party ‘[m]ay’ also ‘[n]otify an account debtor or other 

person obligated on collateral to make payment or otherwise render performance to 

or for the benefit of the secured party.’”102 With these permissive provisions and

because there is nothing in the statute that requires a secured party to foreclose to 

enforce its rights, the court rejected plaintiff’s argument and quashed the writs.

103

 

4. Discussion

As a judgment creditor serving a writ of garnishment on the Property’s 

tenants, Navient did not gain a clean and full lien in the rents. Rather, it gained the 

right to restrain those parties from disposing of the property and stepped into the 

shoes of BPG. That is, Navient gained no greater rights in the rents than BPG 

possessed on the day the writs were served – September 19, 2023 (or later).

By entry of the Final Judgment and a lien automatically attaching to the 

Property (which remained unsatisfied for 60 days), an Event of Default occurred.104 

At that moment, BPG’s right to possess and use the rents automatically ceased and 

101 Id., at 652, (emphasis in original) quoting Mich. Comp. Laws Ann. § 440.9601(1)(a).

102 Id., quoting MCL §440.9607(1)(a)).

103 Id., at 652 (emphasis in original). 

104 Even if Lender had originally consented to the entry of the Final Judgment and lien on the 

Property, it no longer consented as of September 11, 2023. Thus, under either scenario, an Event 

of Default occurred before September 19, 2023.
28

Lender had the right to the rents.

105

 Because BPG no longer had a right to the rents, 

Navient could not have a right to the rents, as it could have no greater rights than 

BPG. Thus, Navient could not compel the garnishees to pay the rents to it. At that 

point, the Lender held the right.

Pursuant to Section 9-317, Lender, as a prior perfected secured creditor, has 

priority over Navient, as a subsequent lien creditor. Despite the clear priority set 

forth in Section 9-317, under American Home and the Illinois cases, Navient argues 

that Lender was required to take remedial action to preserve its priority. Because it 

did not do so until after the writs were issued, according to Navient, Lender cannot 

prevent Navient from collecting the rents. This line of case and the “use-it-or-loseit” theory of a secured party’s rights were reviewed more recently in Legacy Bank v. 

Fab Tech Drilling Equip., Inc.106 and Davis v. F.W. Fin. Srvs., Inc.107

As noted in Davis, S.E.I.U. construed the security agreement in that case as 

imposing three preconditions to the secured creditor’s right to its collateral: “that (1) 

a default occur, (2) the secured party declare a default, and (3) the secured party take 

‘affirmative steps’ to exercise its rights.”108 Thus, according to the S.E.I.U. court, if 

any one of these conditions remain unsatisfied at the time the lien creditor served its 

105 See Loan Agreement, D.I. 133, Ex. 4, § 2(a),(b).

106 566 S.W.3d 922 (Tex. App. 2018).

107 317 P.3d 916 (Or. Ct. App. 2013).

108 Id., at 923.
29

writ of garnishment, the secured creditor constructively waived its priority rights.109 

One CW and American Home, involving the same contractual language as in 

S.E.I.U., ruled in the same fashion.

The use-it-or-lose-it theory, however, is inconsistent with the UCC. This 

theory imposes a requirement on the secured party which is not mandated by Article 

9. Indeed, Section 9-601 describes the secured creditor’s rights after a default which 

as permissive – a secured creditor “may reduce a claim to judgment, foreclose, or 

otherwise enforce the claim.” No action is mandated by this section.

Further, the use-it-or-lose-it theory, which is essentially a constructive waiver, 

is contrary to the terms of the Loan Agreement. In it, Lender was given discretion 

whether and when to exercise its rights and remedies after an Event of Default, 

whether or not Lender “commenced any foreclosure proceeding or other action for 

the enforcement of its rights and remedies” and no delay or omission in pursuing 

any remedies will impair such remedies or be “construed as a waiver.”110 

Additionally, the parties’ rights are expressly preserved by Section 9-601 (“[a]fter 

default, a secured party has the rights provided in this part and, ... those provided by 

agreement of the parties). As Comment 3 makes clear, the parties’ agreement will 

determine whether a waiver occurred. Ignoring the terms of the Loan Agreement to 

109 Id.

110 Loan Agreement, §§ 8.2.1, 8.2.2, 8.2.4.
30

find a waiver is against Delaware policy to enforce parties’ agreements as they have 

negotiated them.

111

Under the countervailing approach – trace and recapture – “until a secured 

party declares a default [or a default otherwise occurs] and acts on its right to 

collateral, a garnishor is entitled to take the collateral; however, in doing so, the 

garnishor takes traceable collateral subject to the secured party’s interest.”112 Thus, 

after a default, where the secured creditor has not taken action with respect to its 

collateral when the writ of garnishment is served, the lien creditor may collect the 

funds, but the funds are subject to the secured party’s lien.113 Thus, the secured 

creditor does not lose its rights.114 

This approach is consistent with Frierson, where the court ruled that the lien 

creditor could garnish funds in the judgment-debtor’s accounts, but those funds were 

“subject to” the secured creditor’s lien.115 While the Illinois cases and American 

Home relied on Frierson, commentators have argued that those court misapplied 

Frierson and misconstrued the security agreement at issue in S.E.I.U.

116

 None of the 

111 Loan Agreement, § 8.2.4 (Lender’s omission to act “shall [not] be construed as a waiver”).

112 Davis, 317 P.3d at 924 (emphasis added).

113 Id.

114 Legacy Bank, 566 S.W.3d at 930. This is not to say that a secured party can never waive its 

rights. To be sure, the terms of the parties’ agreement will inform such a determination. 

115 Frierson, 868 F.2d at 305.

116 See Legacy Bank, 566 S.W.3d at 929 (citing Miller & Bjerre, 9B HAWKLAND UCC SERIES 

§ 9-317:2 at n.39 (Davis “more thoughtfully” reflects the principles of Article 9)); Jeanne L. 

Schroeder, David Carlson, Three Against Two: On the Difference Between Property and Contract 
31

cases relied upon by Navient recognized, as Frierson did, that the prior perfected 

secured creditor’s rights attach to the funds, even in the hands of the lien creditor.

For several reasons, the Court finds that the “trace and recapture” approach, 

as applied in Davis,

117 Legacy Bank,118 and Frierson, to be consistent with Delaware 

law and the policies of Article 9. 

First, Section 9-601 provides that after a default, a secured creditor may

exercise its rights. Nothing in this section requires the secured creditor to act.

Second, Section 9-610 provides that after a default, the secured creditor may 

dispose of the collateral. Again, this section is permissible. Furthermore, as the 

Comment makes clear, even if a junior secured creditor disposes of the collateral, 

the senior secured creditor does not lose its security interest. If a secured creditor’s 

rights are preserved even against a junior secured creditor, why would a later lien 

creditor be granted any greater rights? The use-it-or-lose-it cases do not address this 

point.

and the Example of Deposit Accounts in Bankruptcy, 35 Emory Bank. Dev. J. 417 (2019), at *447-

49.

117 In Davis, after the debtor defaulted, the secured creditor did not take action to recover its 

collateral. Another creditor obtained a judgment against the debtor and subsequently served writs 

of garnishment. The lien creditor obtained funds through the garnishment. When the secured 

creditor later sought to recover its collateral from the lien creditor, it refused to return the funds. 

The Davis court ruled that because the garnishment occurred after a default but before the secured 

creditor exercised its rights, the funds were properly turned over to the lien creditor, but they were 

subject to the secured creditor’s interest. Despite the secured creditor’s delay in exercising its 

rights, it was entitled to recover the funds from the lien creditor. 317 F.3d at 926.

118 Legacy Bank largely relied on Davis and ruled that the secured lender did not waive its rights 

by not foreclosing on its collateral until after writs of garnishment were served.
32

Third, the “touchstone” of Article 9 is “[t]he primacy of a prior perfected 

secured creditor’s claim to collateral.”119 The policy of the UCC is to simplify and 

clarify the law governing commercial transactions and to allow parties to “rely on a 

clear and predictable set of rules.”120 If a secured creditor is at risk of losing its 

priority status, it would be forced to foreclose or “take some remedial steps” even 

when a technical default occurs. There are valid reasons why a secured creditor may 

not exercise any or all of its rights upon a default. The secured creditor might choose 

to allow the debtor to continue operating the business in hopes that its financial 

condition will improve (as occurred in System Soft) and the secured creditor will 

receive a larger return than if it foreclosed on the assets.121 Forcing the secured party 

to foreclose or take some action with respect to its collateral would also deprive the 

secured party of the benefit of its bargain in the bundle of rights it negotiated in the 

parties’ agreement. This is against Delaware policy of freedom of contract and of 

our courts enforcing commercial contracts as written. The use-it-or-lose-it approach 

would lead to uncertainty and lack of predictability in commercial transactions.

122

 

A secured party would have to guess whether it took sufficient action to satisfy a 

reviewing court that it did not constructively waive its priority status.

119 Davis, 317 P.3d at 925.

120 6 Del. C. § 1-103; Motors Liquidation, 103 A.3d at 1017.

121 See System Soft Tech., 301 Mich. App. 642.

122 Motors Liquidation, 103 A.3d at 1016-17.
33

Finally, even if the Court were to find S.E.U.I. and the use-it-or-lose-it line of 

cases persuasive, they are factually distinguishable. Unlike those cases, Lender 

declared a default, accelerated the loan, and revoked BPG’s license to the rents, all 

before the writs were served.

Because Lender has a valid, prior perfected secured lien and a default occurred 

before the writs of garnishment were served, Lender maintains its priority status and 

Navient’s writs are junior to Lender’s rights. 

Citing Hager v. Frantz-Hager,123 Navient requests the Court order that the 

writs be honored with respect to funds in excess of BPG’s monthly loan obligation 

and operating expenses. This request is denied. First, to require such payments 

would ignore the acceleration of the loan balance. Thus, BPG’s current obligations 

are not limited to the monthly payment it was making before the default. Second, 

Hager does not support such a ruling. In Hager, the relevant statute imposed a trust 

on proceeds from a construction contract only to the extent sufficient to pay the 

subcontractors. Funds in excess of that amount were not trust funds. After the court 

determined the amount required to pay the subcontractors, it permitted the excess 

funds to be paid to pursuant to the writ of garnishment.124 Here, all of the rents are 

subject to the Lender’s rights.

123 2014 WL 1614603 (Mich. Ct. App. April 22, 2014).

124 Id., at *1.
34

Navient, therefore, sits in second place behind Lender. 

C. Additional discovery

Navient believes that junior unsecured creditors are being paid ahead of 

Navient. Lender did not address this issue in its supplemental briefing, but at the 

second hearing, counsel for Lender relayed his belief that this was not occurring. 

Navient has post-judgment discovery tools available to it, which can be deployed 

against BPG and Lender. Thus, unless and until a protective order is entered, 

Navient is free to use those tools to determine whether its rights are being impaired 

and, if appropriate, to file a motion seeking relief.

V. Conclusion

Lender has a prior perfected, secured interest in the rents. It declared the loan 

in default, accelerated the loan, revoked BPG’s license in the rents before Navient’s 

writs were served. Thus, Navient’s valid writs are subordinate to the Lender’s 

position. 

IT IS HEREBY DECLARED that Lender’s prior, perfected security interest 

has priority over Navient’s garnishment writs.

IT IS SO ORDERED.

/s/Kathleen M. Miller

Judge Kathleen M. Miller