Case name unknown
This matter came before the Court January 20, 2026 on the Motion for Discharge filed by Charles K. Breland Jr. (“Breland“), the Objection thereto filed by Billy C. Merchant (“Merchant“), The Notice of Removal of Baldwin County CV No.25-901556 by A. Richard Maples (“Maples“); the Motion to Dismiss Party filed by Maples; Breland and Florencia Development Inc.‘s Motion to Dismiss or Abstain, Merchant‘s Motion to Remand, and the related filings and briefs. (BK docs. 2716, 2723, 2730, AP Docs. 1, 4, 6, 10, 11).1 Proper notice of hearing was given and appearances
PROCEDURAL HISTORY AND FACTUAL BACKGROUND2
The Debtor, Charles K. Breland, (“Breland“) filed the above-styled Chapter 11 bankruptcy on July 8, 2016 (the “Petition Date“). (BK doc. 1). On the Petition Date, Breland‘s interests in numerous entities including Florencia Development Inc.3 (“Florencia“) became property of the Bankruptcy Estate. (BK doc. 42;
All Estate assets will revest in the Debtor individually upon closing of the Settlement except for Unit 903 of the Florencia condominium complex in Perdido Key, Florida, including the boat slip assigned to Unit 903, one designated parking space in the garage below the complex, the carriage house assigned to Unit 903, and the furnishings in Unit 903 (the “Condo“). . . Assets will revest free and clear of all liens, claims, and encumbrances, except as set forth herein (see paragraph 2.e below), in the Order approving the Settlement, and/or in the Order granting the Second Supplemental Application for Compensation as counsel for Debtor filed by McDowell Knight Roedder & Sledge, LLC (“McDowell The Trustee will initially and immediately list the Condo for sale at a price of $2.4 million. The Trustee will enter a listing agreement with Remax providing for a 5% commission to the listing agent. The Trustee will have full control over the marketing and sales process subject to the Debtor‘s input, and the Debtor shall cooperate in good faith with the Trustee, but the Debtor will not have the right to veto any sale. No further Court order will be required for the Trustee to engage a new listing agent, to change the list price, to sell the Condo,to pay the Levada debt referred to in subparagraph d. below at closing, or to pay any commission or other necessary and reasonable expenses of sale . . . Notwithstanding the foregoing, the Trustee‘s authority to sell the Condo is contingent upon a sale price which will yield proceeds sufficient to pay the amounts in paragraphs d(1) and d(2) below. (Doc. 2632) . . . Net proceeds after payment of necessary and reasonable expenses of sale of the Condo will be paid to satisfy remaining payments due under the Plan in the following order and priority: (1) at closing of the sale of the Condo, Levada will be paid directly from the closing agent $1,000,000.00 plus interest as set forth in Article IV.D.1 of the Plan and any post default reasonable attorneys’ fees subject to the $20,000 cap referenced in paragraph 2(b), above; next (2) unpaid administrative and professional expense claims; and next (3) unpaid fees of McDowell Knight . . . (Id. at 2, 3).
Pursuant to the Order Approving the Compromise, the assets of the Estate, with the exception of the Florencia Condominium and causes of action, revested in the Debtor on November 6, 2023 when the Settlement Agreement closed. (BK doc. 2641). On June 26, 2025, the Trustee sold Florencia Condominium Unit 903.(Bk doc. 2677). The sale included an Assignment of Exclusive Right to Use of Boat Dock Slip. (BK doc. 2677-1). Net proceeds of
Merchant was not a pre-petition creditor of Breland, did not assert any claims against the Bankruptcy Estate prior to confirmation, did not seek court approval for any loans to Florencia or the Debtor, and did not request any administrative claim(s). On January 27, 2025 he filed an Adversary “Complaint To Determine Validity, Amount, and Priority of Liens and Request For Declaratory Judgment Against Debtor” seeking to compel the Chapter 11 Trustee to interplead the net proceeds from the sale of Florencia Unit 903 pending resolution of such dispute. (Merchant v. Breland, Bankr. S.D. Ala. Adv. Pro. No. 25-01004, docs 1, 18). Merchant‘s claims arose from a January 27, 2023 Joint Venture Agreement between Merchant and Florencia (“JVA“).5 The terms of the JVA provide that: (1) Merchant would supply funding for improvements to boat slips adjacent to the Florencia Condominium; (2) Florencia would repay the loan plus 20%; and (3) Merchant would receive at least 60% of the proceeds of the sale of each boat slip until repaid. (Id. at doc 1-2). In response to Merchant‘s Complaint, Florencia and Breland contended that: (1) they
This Court abstained and dismissed Merchant‘s Adversary Proceeding on procedural grounds because: (1) bankruptcy courts have limited jurisdiction; (2) Merchant‘s claims were essentially, post-petition, post-confirmation, state-law claims based on alleged breach of contract by Florencia (a non-debtor, third party); (3) Breland‘s Chapter 11 was confirmed in June 2022; (4) assets revested in Breland on November 2023; and (4) the administration of the Chapter 11 case was quickly approaching conclusion with payment of all allowed claims in full.6 (Id. at doc. 23). This Court also noted that even if it had jurisdiction, permissive abstention would be warranted in the interest of justice, judicial economy, and respect for state law because the claims relate to alleged breach of a post-petition contract with a non-debtor entity, state law issues predominate, state courts are well suited to handle such matters, Merchant‘s claims are outside the scope of the Chapter 11 plan, and litigating such claims in bankruptcy court would impede the efficient completion of the administration of the bankruptcy estate. (Id.)
After this Court abstained, Merchant filed state court litigation against Breland, Florencia, and the Chapter 11 Trustee, Maples, in the Circuit Court of Baldwin County, Alabama7 seeking to pursue claims under the JVA for collection on notes receivable, fraud, misrepresentation, promissory fraud, fraudulent transfer, voidable transfer, and declaratory judgment. The Trustee removed the Baldwin County Litigation to this Court on November 11, 2025 and sought dismissal from the action. (AP docs. 4,5).
ANALYSIS
As this Court has noted on several occasions, bankruptcy courts have limited jurisdiction and must assess their authority to adjudicate matters brought before them.
Mandatory Abstention
A core proceeding is one in which the matter at issue is one which ” could arise only in bankruptcy.” In re Allied Sign Co., Inc., 280 B.R. 688, 691 (Bankr. S.D. Ala. 2001)(citing In re Toledo, 170 F.3d 1340, 1345 (11th Cir.1999). Congress did not intend for bankruptcy courts to hear matters just because a debtor is somehow involved. In re Efron, 535 B.R. 505, 511 (Bankr. D.P.R. 2014), aff‘d, 529 B.R. 396 (B.A.P. 1st Cir. 2015). The Bankruptcy Code provides,
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under Title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is
commenced, and can be timely adjudicated in a State forum of appropriate jurisdiction . . .
Thus,
Here, the allegations in the Adversary Complaint do not arise under the provisions of Title 11. Although Merchant previously asserted that his claims were somehow core proceedings under
Permissive Abstention
Even when mandatory abstention is not required, bankruptcy courts may decline to consider certain matters under the doctrine of permissive abstention. Courts can permissively abstain from hearing a particular proceeding arising under Title 11 or arising in or related to cases under Title 11 in, “the interest of justice, or in the interest of comity with State courts or respect for State law.”
An analysis of the relevant factors in this case supports permissive abstention. The first and most compelling factor is that Merchant‘s purported claims will not have any effect whatsoever on the administration of the Bankruptcy Estate. The underlying bankruptcy case has already been fully administered. The second factor also weighs in favor of abstention as Merchant‘s allegations are essentially state-law claims that do not arise from bankruptcy. Although bankruptcy courts may apply state law, such undertaking is warranted only when there will be an effect on the bankruptcy estate. The third and fourth factors also support abstention because the claims are not necessarily difficult or unsettled in nature and state courts are equipped to handle such matters.10 The fifth and sixth factors further favor permissive abstention because as discussed
CONCLUSION
For these reasons, this Court finds that it lacks jurisdiction to adjudicate Merchant‘s remaining claims against Breland and Florencia. Accordingly, it is hereby ORDERED, ADJUDGED, and DECREED as follows:
- Breland and Florencia‘s Request for Abstention and Merchant‘s Motion to Remand are GRANTED with regard to the remaining claims and parties.11
- As the Chapter 11 Trustee was dismissed from this action, Merchant and his counsel are directed to take all actions necessary to ensure that no adverse action is taken or attempted to be reinstated against the Trustee in the state court proceeding.
- This Order should not be construed as determination on the merits of the claims and defenses of the remaining parties in the litigation or preclude the parties from seeking a determination with regard to the appropriate venue upon remand.
Dated: February 5, 2026
JERRY OLDSHUE
CHIEF U.S. BANKRUPTCY JUDGE