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barred by judgment and estopped by agreement from asserting the
aforementioned breach claim against Ms. Smith. On appeal, the
appellate court upheld the trial court’s decision. See id. The
appellate court noted that petitioner indemnified Ms. Smith from
Federal income tax liabilities before 1987 pursuant to the 1988
settlement agreement.4 Id. at 123. Consequently, the appellate
court held petitioner to be estopped from claiming that Ms. Smith
breached the divorce agreement by failing to file a proper 1986
Federal income tax return. Id.
4In Smith v. Ferguson, 160 S.W.3d 115, 123 n.5 (Tex. Ct.
App. 2005), the court set forth the tax indemnity provision of
the 1988 settlement agreement as follows:
“Ferguson does hereby agree to pay out of the proceeds
of the Closing all amounts due to the United States
Internal Revenue Service for past due federal income
taxes which have resulted in placement of federal tax
liens against any asset in which Smith has a present
interest, and to further obtain releases for Smith from
the Internal Revenue Service releasing federal tax
liens that it now has in any such property in which
Smith has an interest. Ferguson further agrees to
indemnify and hold Smith harmless from any and all
demands, claims, actions and lawsuits, including,
expenses, costs and attorney’s fees incurred in
connection with the defense thereof or related to any
and all taxes, whether income, ad valorem or of any
other character, plus any penalties and interest
associated therewith, for tax years prior to 1987.”
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