It is my opinion that there was a failure of consideration for the note given by Hamilton and Craig when Krodell refused to deliver a deed to the apartment house. There was a failure of consideration for the original assumption agreement, and the note in question was part of that agreement.
Since the majority does not discuss the merits of the defense of failure of consideration, I will set out the reasons why there was a failure of consideration for Hamilton's and Craig's promise to assume Krodell's debts. When a defendant asserts the defense of failure of consideration to an action on a contract, he is saying that he has not been given the performance for which he bargained and that such performance is a condition precedent to his own duty to perform. Corbin on Contracts, §§ 133, 658 and 1255 — 1263 (1964 Ed.). In a contract for the sale of land, the promises of the vendor to convey and of the vendee to pay, in the absence of a contrary intent, are regarded as mutual and dependent, each performance being conditioned on tender of performance or performance by the other party. Clifton v. Charles, 53 Tex. Civ. App. 448 [53 Tex. Civ. App. 448], 116 S.W. 120 (1909, writ refused); Echols v. Miller, 218 S.W. 48 (Tex.Civ.App. 1920, no writ); Reitzer v. Medlake Development Co., 27 S.W.2d 563 (Tex.Civ.App. 1930, no writ); Corbin on Contracts, § 663 (1964 Ed.). It may be assumed that Hamilton and Craig were obligated to pay Krodell's debts as they came due; and that if they had not done so, they would have breached their promise to Krodell. That does not mean, however, that Hamilton and Craig were obligated to continue paying the debts regardless of Krodell's actions. Though one party to a contract may be obligated to begin performance immediately, his promise in that sense being independent, he is not obligated to continue performance when the other party has refused to perform. The duty of *Page 493 the first party to continue his performance is conditioned on the latter party's willingness and ability to perform. Corbin on Contracts, §§ 657, 1259 (1964 Ed.). Williston on Contracts, § 814 (1936 Ed.).
The contract involved in this case is bilateral. Hamilton and Craig promised to assume Krodell's debts in return for Krodell's promise to convey his interest in the apartment house. Hamilton and Craig began performance of their obligation by paying Krodell's debts. Their duty to continue that performance was conditioned upon Krodell's willingness to convey title to the apartment house. The only evidence in this record concerning Krodell's willingness to perform is that he refused to deliver the deed to Hamilton and Craig. When Krodell made such refusal, there was a failure of consideration; and Hamilton and Craig were discharged from their duty to pay Krodell's debts.
The majority opinion suggested that S H did not rely upon Rose's status as a third party beneficiary of the assumption agreement between Hamilton, Craig and Krodell. One of the main points of error of S H in this Court states `The Court of Civil Appeals erred in failing to hold that Krodell's purported failure to convey (his title to the apartments) could not constitute a defense to Petitioner's third party beneficiary rights. * * *' In support of such point, S H devoted several pages of its brief to a discussion of its rights as a third party beneficiary as the assignee of Rose. I therefore regard the matter as being before the Court and as being important to a correct disposition of the case.
Rose, as a third party beneficiary of the contract between Hamilton, Craig and Krodell, would have had no greater rights under the assumption agreement than Krodell against Hamilton and Craig. Austin Bridge Co. v. Teague, 137 Tex. 119, 152 S.W.2d 1091 (1941); Restatement of Contracts, § 140. Furthermore, Rose, being payee of the note, was not a holder in due course, and, therefore, was subject to all defenses against the note. J. I. Case Threshing Machine Co. v. Howth, 116 Tex. 434, 293 S.W. 800 (1927).
The majority of this Court holds, however, that the note given by Hamilton and Craig, because supported by an independent consideration, was a contract separate and apart from the original assumption agreement; and, therefore, not subject to the defenses available to Hamilton and Craig against an action on the original assumption agreement. I will assume that there was an additional consideration given by Rose which would ordinarily be sufficient to support the note against the defense of want of consideration. But the defense in this case is not Want of consideration; it is Failure of consideration, Hamilton and Craig simply did not receive the performance for which they bargained when they contracted the debt and gave the note. The note was a small part of a large transaction. There is no contention by S H that the note was given by Hamilton and Craig solely as payment for the extension of time. In fact, in its brief S H states that `(i)t is undisputed that the Hamilton and Craig note delivered to Rose grew out of and was in conformance with the * * * assumption agreement.' The note in this case was simply evidence of Hamilton's and Craig's original debt to Rose. Rose could not have recovered on the debt. An action on the note should fare no better.
I would affirm the judgment of the Court of Civil Appeals.
SMITH, J., joins in this dissent. *Page 494