Intentional Infliction of Emotional Distress IIED: Texas Courts Part 1

Today’s blog will concern the tort of Intentional Infliction of Emotional Distress (IIED) in Texas Courts civil proceedings and focusing especially on this tort as it relates to the Dallas Texas collection attorney. Defamation and wrongful discharge, have a different set of standards and are not addressed herein.

How do Texas Courts define Intention Infliction of Emotional Distress?

The Dallas Court of Appeals held in 2013, that actions for IIED are available when a person intentionally inflicts severe emotional distress in a manner so unusual that the victim has no other recognized theory of redress, also holding that such cases are rare. Hairston v. SMU 441 SW3d 327 (Tex. Civ. App- Dallas 2013, pet. denied). Also, see Hoffmann-La Roche v. Zeltwanger 144 SW3d 438 (Tex. 2004).

What are the legal ‘elements’ of IIED?

The elements of a cause of action for IIED proceedings are as follows:

  1. The Plaintiff is a ‘person’;
  2. The Defendant acted intentionally or recklessly;
  3. The emotional distress suffered by the Plaintiff was severe;
  4. Defendant’s conduct was extreme and outrageous;
  5. Defendant’s conduct proximately caused Plaintiff’s emotional distress;
  6. No alternative cause of action would provide a remedy for the severe emotional distress caused by the Defendant’s conduct.

The above elements were recited by the Texas Supreme Court in Kroger Tex. v. Subera 216 SW3d 788. There is no cause of action in Texas for ‘mere’ negligent IIED. The ‘Intentional’ element means that the Defendant either desires to cause t4he consequences or believes that they are substantially certain to result from its act. Toles v. Toles 45 SW3d 252 (Tex. App. – Dallas 2001, pet. denied).

Intent can be inferred from circumstances or the Defendant’s conduct, not only from their overt expressions because a Defendant will rarely admit that they knew the distress would result from his/her conduct. Morgan v. Anthony 27 SW3d 925 (Tex. 2000).

In Texas courts collection actions also regarding Intentional Infliction of Emotional Distress (IIED) Plaintiff may establish ‘reckless conduct’ should Defendant know or have reason to know of facts that create a high degree of risk of harm to another, and then deliberately acts in conscious disregard or with total indifference to that risk. Twyman v. Twyman 855 SW2d 619 (Tex. 1993). ‘Severe Emotional Distress’ includes painful emotional and mental reactions, such as embarrassment, fright, horror, grief, shame, humiliation or worry. Blanche v. First Nationwide 74 SW3d 444 ( Dallas – 2002).

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Unconscionability, Waiver, Limitation Of Liability: Part III

Q—What is the ‘discharge’ defense?

Another sticky area of contract defenses is the area of discharge, on account of plaintiff’s repudiation of the contract or plaintiff’s own material breach of the contract.  If plaintiff repudiates a dependent promise or materially breaches the contract itself, then the defendant will allege that it has been discharged from performing the contract, due to plaintiff’s repudiation of the contract.  Long Trusts v. Griffen 222 SW3d 412 (Tex. 2006).

Stated another way, a party that does not perform its own obligations cannot enforce the remaining terms of the contract against the defendant.  Interestingly, of course, from defendant’s point of view, if the plaintiff repudiates the contract, or if plaintiff materially breaches the contract, this will also support defendants own breach of contract claim against the plaintiff, through a counter-claim by the defendant against the plaintiff.

Q—What about the ‘venue’ for breach of contract lawsuits?


Although venue, in Texas collection actions, is a long and involved area of the law, for this discussion, it also can be a defense for a defendant.  If a breach of contract lawsuit is brought in the wrong county, a defendant may defend such contract obligation and seek a transfer, if the contract provides specifically that the obligation was to be performed in a certain county or a definite place Tx. Civ.  Prac. & Rem. Code sec 15.035(a)

For instance, in Justice of the Peace cases, a lawsuit based upon an oral contract for labor actually performed may only be brought in the county and precinct, where the labor was performed. KW Construction v. Stephens 165 SW3d 874 (Texarkana 2005).  In suits brought against a defendant based upon a written contract involving a consumer transaction for goods, services, loans, or extensions of credit, which is intended for personal, family or household or agricultural use, such collection suit must be filed either in the county where the defendant signed the contract or the county where the defendant resided when the suit was commenced. 

Trying to restrict or change venue, and enforce against the defendant, can backfire because there are several Texas Supreme Court cases that say that generally any agreement in a contract in which the parties try to restrict mandatory venue, is void as being against public policy.  This is not true in large transactions, however, and choice of venue provisions are completely enforceable in what is called “major transaction”, which is defined as a commercial transaction involving at least $1,000,000.00 in controversy.

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Unconscionability, Waiver, Limitation Of Liability: Part I

Q–‘Unconscionability’ sounds like fraud; what is it?

Texas Collection attorneys will sometimes see the defense called ‘unconscionability’. Generally either in collection or factoring litigation, a contract can be deemed unconscionable if it is unfair because of the overall or gross one-sidedness of the contract terms. 

There are two main issues associated with unconscionability, being first, how the parties arrived at the contract terms, and whether there is some legitimate commercial reason justifying the terms of the contract.  The discussion about how the parties arrived at the contract terms addresses the “procedural aspect” of unconscionability, whereas the discussion about the “legitimate commercial reasons”, is a substantive aspect. 

A defendant will bear the burden of proving either a procedural aspect or substantive aspect of unconscionability, and of course this defense  must be pleaded under Rule 194.

Q—where does ‘fairness’ come into play?

Regarding whether there is a legitimate commercial reason justifying the contract terms, this focuses mainly on the fairness of the contract.  If it is utterly lopsided or there is no reasonable parity between the values exchanged, it will appear to be substantively unconscionable. 

As to procedural unconscionability, the court is looking at the parties assent and all the facts surrounding the bargaining process.  If the court senses oppression or unfairness, this taints the negotiation process in the contract negotiation. 

There are other factors which court will look at in Dallas factoring contract decisions, such as the presence of deception, or some unethical business practice.  Also, if one party appears to have absolutely no bargaining power, or ability to change the contract, and this would be a factor present in ‘adhesion contracts’, which is actually a standard contract usually used for consumer transactions and looks like a ‘take it or leave it’ sort of contract, in which the consumer has no real bargaining rights and is obtaining goods or services only by acquiescing to the contract terms.   

Accord Satisfaction and Novation


Q- I was sued, but I settled the matter, now the creditor is coming back, wanting more. What can I do?

Today’s subject as used by Texas collection attorneys is the defense of accord and satisfaction. Accord and satisfaction is an affirmative defense and rests on a new contract which is a new written express contract or an implied contract, in which the parties agree to discharge the existing obligation. In this sense, the term “accord” is a new contract which discharges the existing old obligation.

Also, the “satisfaction” means the performance of that new contract to which the parties agree to. Importantly, because an accord is essentially a new separate agreement or contract, all of the elements which are necessary to establish the formation of a contract, such as offer, acceptance, and consideration, must also exist and be proven. For example, if a check is tendered, in an effort to discharge a disputed obligation, the acceptance of the check constitutes an accord and satisfaction. Harris v. Rowe 593 SW3d 303 (Tex. 1979); also see TransAmerican v. Finkelstein 933 SW2d 591 (San Antonio 1996).

Here are the elements that a defendant must establish to prove accord and satisfaction:

  1. The parties have a legitimate dispute about the underlying obligation.
  2. The parties intentionally and specifically agree to discharge such obligation.
  3. Debtor’s payment to the creditor was intended to be full satisfaction of the entire claim
  4. The parties had a “meeting of the minds”.
  5. There exists an unmistakable communication to the creditor, that the tender of the sum which is less than the contract price, was made on the condition that creditor’s acceptance of such sum constitutes full satisfaction of the underlying obligation.
  6. The condition made, was plain, definite, and certain.
  7. The statement accompanying the tender of the lesser sum was so clear, full, and explicit, that it is not susceptible to any other interpretation.
  8. The offer was accompanied by declarations that the creditor was certain to understand.

Honeycutt v. Billingsley 992 SW2d 570 (Houston 1st, 1999).

In the situation in Texas factoring or debt collection matters, when a debtor pays a creditor with a check or draft, or which purports to satisfy the creditor’s entire claim, then the creditor must return the tendered check or draft to the debtor in order to repudiate the transaction. It is not permissible for the creditor, in that situation, to simply strike out or cross out the debtor’s conditions on the face of the check or draft and then insert the creditors own provisions, for instance, that the check is only in partial payment, or “under protest”.

Checks often have a restrictive endorsement, and if creditor cashes the check, which is for less than full payment, but strikes the check maker’s restrictive endorsement, and inserts some different notation, then the courts will hold that the full accord and satisfaction has occurred. Metromarketing v. HTT Headwear 15 SW3d 190 (Houston 14th 2000).

Another available defense in factoring in collection matters is where a Defendant asserts the defense of novation. Essentially, a novation is a substitution that either replaces an existing obligation with a new obligation or replaces one of the original parties with a new party. To establish a novation, the Defendant will show the earlier valid contract, and a mutual agreement to a new contract, together with the express extinguishment of the earlier contract, plus a new, valid contract.

Obviously, if a novation is shown, it discharges the original contractual obligation, and only the new obligation will be enforceable. Novation is also an affirmative defense, and it must be pleaded by the Defendant or it is waived. Fulcrum v. AutoTester 102 SW3d 274 (Dallas 2003).

Another defense available to the Defendant in addition to accord and satisfaction, or novation, is the defense of modification. In this case, Defendant alleges that the original contract between the parties was modified and that the Defendant has complied with the terms of the modified contract. Modification in this sense means the introduction of a new or different element into the contract, that the general purpose and effect of the original contract is unchanged. Obviously, whether the contract has been modified is a question of fact that depends on the parties intentions.

The elements of “modification” are as follows:

  1. Mutual assent-there must be a meeting of the minds between all parties, on the new terms of the modification.
  2. Consideration-a modification to the contract must be supported by new consideration.
  3. Oral modifications-a written contract can be modified, by subsequent oral agreement. The contract as modified, however, must also comply with the statute of frauds. This defense was discussed in our earlier blog. If the terms of said oral modification “materially change” the original contract, so that it becomes subject to the statute of frauds, such modification must be in writing to be enforceable. On the other hand, if such modification is not subject to the statute of frauds, and does not change contract terms material to the original contract, in that case, the oral modification is enforceable.

Arthur J. Gallagher v. Dieterich 270 SW3d 695 (Dallas 2008).

In addition to the above defenses, Defendants may want to allege that they are entitled to an offset, or that a contractual damage provision is actually an unenforceable penalty. If a contract has a liquidated damages provision, if it is a penalty, it is, therefore, an unenforceable penalty whether such provision is unenforceable is a question of law, not fact.   The defense of “penalty” must be pleaded or else it is waived.



Estoppel Defenses: Part 2

This week we’re finishing up a subject relating to different ‘defenses’ available to Defendants in Texas collection cases, and specifically, doctrines known as “estoppel by misrepresentation”, also known as equitable estoppel, and on the other hand, the claim of quasi-estoppel, also known as “estoppel by conduct”.

Another equitable theory not often used, but which will accomplish justice in many cases, are cases in which a third -party beneficiary breach of contract action is brought, for a party’s refusal to pay under a contract.  The issue is whether the third-party is an intended third party beneficiary under the agreement.  The leading case is Stine v. Stewart  80 S.W.3d  586 (2002 Tex).  Stine is a Texas Supreme Court case in which the Trial Court originally concluded that Stine was an intended third party beneficiary under a contract.  The Court of Appeals differed, however, ruling that Stine was only an incidental beneficiary, but the Supreme Court reversed the Court of Appeals, holding that Stine was an intended third party beneficiary of the agreement.  The case involved a divorce in the early 90’s, in which the Stewarts executed an agreement incident to divorce, disposing of marital property, and agreed that if a certain house was sold, certain monies owing to Stine were to be paid upon the sale.  Stine did not sign the agreement.  When one of the Stewarts sold property, leaving net proceeds, Steward did not pay Stine so Stine sued Stewart for breaching the agreement.

The Trial Court heard the evidence and concluded that Stine was an intended third-party beneficiary of the agreement.  When the Court of Appeals reversed, holding that the agreement does not clearly and unequivocally acknowledge the debt owed to Stine, the Supreme Court stated the applicable law.  The Supremes ruled that the third-party may recover on a contract, made between other parties, only if the parties intended to secure a benefit for that third-party, and only if the contracting parties entered into the contract directly for the third-party’s benefit.  The Court further said that to determine the party’s intent, courts must examine the entire agreement when interpreting a contact, and give effect to all of the contract’s provisions so that none are rendered meaningless.  Further, if the agreement states that the third-party beneficiary is a “creditor beneficiary” under the agreement, performance will come to him in satisfaction of a legal duty owed to him by the Promisee.  Such a duty may be indebtedness.  

Obviously, the Stewarts responded that Stine did not have standing to sue under the agreement because she was only an incidental beneficiary.  Stine, on the other hand, contended that the marital agreement acknowledges a $50,000 debt owed to her and recognizes that a note existed, and requires the Stewarts to pay amounts due under said note.  The Supremes concluded that Stine was a third-party creditor beneficiary.  The agreement expressly provided that the Stewarts intended to satisfy an obligation to repay to Stine the $50,000 that the Stewarts owed her.  Thus, the agreement’s terms expressly required the Stewarts to satisfy an existing obligation to pay Stine.  

Importantly, in the Stine case, and contrary to the Stewarts’ argument, a third-party beneficiary does not have to show that the agreement signatories executed the contract solely to benefit her as a non-contracting party.  Rather, the focus is on whether the contracting parties intended to at least in part, discharge an obligation owed to a third-party.  Here, the marital agreement was obviously not for Stine’s sole benefit; however, certain contractual provisions expressly stated the Stewarts intention to pay Stine the money due to her.  Also, under the Tex. Civ. Prac. & Rem Code, Sec.16.065, the Court held that the marital agreement acknowledged a debt owed under a note and created a new obligation.  Additionally, the amount of the obligation, must be susceptible of ready ascertainment.  The Court held that the agreement’s language clearly shows that the Stewarts intended to secure a benefit to Stine, as a third party creditor beneficiary.  The agreement also acknowledged the existence of a legal obligation owed to Stine, and consequently, when Stewart breached the agreement, by refusing to pay Stine the money owed as the contract required, Stine was entitled to sue under the agreement.  The Supremes reversed the Court of Appeals judgment and remanded the case to the Trial Court to render judgment consistent with such opinion.

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

Estoppel Defenses: Part 1

Today’s subject relates to different ‘defenses’ available to Defendants in Texas collection cases, and specifically, doctrines known as “estoppel by misrepresentation”, also known as equitable estoppel, and on the other hand, the claim of quasi-estoppel, also known as “estoppel by conduct”. First, equitable estoppel, contains the following elements:

  1. Defendant made a false representation to, or concealed material facts from Defendant; intending that the representation or concealment be acted on;
  2. Plaintiff actually knew the real facts but Defendant did not know or have any way of knowing the real facts;
  3. Defendant relied on the representation or concealment, to its damage and detriment.

Maguire Oil v. City of Houston 69 SW3d 350 (Texarkana 2002). Equitable estoppel is usually raised as a defense, but also, may be raised by Plaintiff, to nullify one of Defendant’s defenses. Cook v. Smith 673 SW2d 232 (Dallas 1984). The theories of ‘fraud’, and equitable estoppel, are different: the foundation of fraud rest upon the misrepresentation itself, whereas equitable estoppel looks at the ‘changed position’, which resulted from the misrepresentation.

The defense of equitable estoppel, therefore, seeks to establish that Plaintiff either made a false representation to, or concealed a material fact from, the Defendant. Equitable estoppel, however, cannot be used or based upon a promise to do something in the future. If Plaintiff’s statement involves Plaintiff’s future promise to do something, a Defendant should instead allege promissory estoppel. Regarding Plaintiff’s “false representation” Defendant must establish that Plaintiff either made a false statement of material fact or that Plaintiff concealed a material fact, by remaining silent while under a duty to speak. The one element, that Defendant must establish Plaintiff made such representation with the intention to be acted upon is, in essence, a representation or concealment, made in bad faith.

In proving equitable estoppel, where Defendant’s evidence establishes that it substantially, reasonably, and detrimentally relied upon Plaintiff’s false representation, the Defendant is showing that “but for”, the representation, it would not have acted. Also, Defendant’s reliance must be reasonable. Johnson & Higgins v. Kenneco (Tex. Sup. Ct. 1998). To have detrimentally relied upon Plaintiff’s representation, the Defendant must have “shifted” from a better position to a worse position, based upon Plaintiff’s representation. Equitable estoppel is an affirmative defense and must be pleaded, or it is waived.

The Texas collections attorney needs to be aware that Quasi-estoppel, or estoppel by conduct, is slightly different, however. Quasi-estoppel is an equitable doctrine, which prevents a party from asserting a right inconsistent with that party’s previous position, to another party’s disadvantage. The brief

elements are as follows:

  1. Plaintiff acquiesced, or accepted a benefit under transaction;
  2. Plaintiff’s position now is inconsistent with its earlier position when it accepted the benefit of the transaction;
  3. It would be unconscionable to allow the party to maintain its present position, to the other party’s disadvantage.

Lopez v. Munoz 22 SW 857 (Tex. 2000). The Lopez case also stated that Defendant needs to establish that it would be unconscionable to allow Plaintiff to maintain its current position, to another’s (Defendant’s) disadvantage.

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate