750   RIGHTS OF INSURED

destroyed before the transfer is made. The vendor contracted to de-liver the premises "in as good condition as they now are," and the parties agreed that in case of failure to perform the defaulting party should pay the sum of $3,000 as liquidated damages. The loss must therefore be borne by the defendant, except as it has protected itself from such loss by insurance. By reason of the accidental destruction of a substantial part of the premises, it can neither per-form nor compel performance. See Wells v. Calnan, 107 Mass. 514, 9 Am. Rep. 65; Libman v. Levenson, 236 Mass. 221, 128 N. E. 13, 22 A. L. R. 560. The purchaser may seek to rescind the contract or take the position that it is at an end for impossibility of performance and recover back the $3,000 he has paid on the purchase price, or he may stand on the contract under the terms of which he paid the $3,000 and claim the stipulated damages. He is not in a position to do both. The measure of defendant's liability in either case is the sum of $3,000.

The judgments below- should be reversed and a declaratory judgment granted in accordance with opinion, with costs in all courts.3

IIISCOCK, C. J., and CARDOZO, CRANE, ANDREWS, and LEHMAN, JJ., concur.

McLAUGHLIN, J., absent. Judgments reversed, etc.

3 See the notes on this case (1925) 25 Colum. L. Rev. 477, (1924) 34 Yale L. J. 87, and the Comment (1925) 9 Minn. L. Rev. 884.

Accord: Appleton Elec. Co. v. Rogers (1930) 200 Wis. 331, 228 N. W. 505, Comment (1930) 5 Wis. L. Rev. 503, where it was held that the risk of loss being on the vendor, he was entitled to retain the insurance proceeds as against the vendee, but that the loss by fire excused the vendee from his duty to pay the purchase price.

Suppose the vendee under a contract takes possession and insures the property in his own name, and afterwards (the property having been destroyed by fire) the vendor is successful in rescinding the contract because of the vendee's fraud. May the vendor recover the insurance paid to the vendee? See Cetkowski v. Knutson (1925) 163 Minn. 492, 204 N. W. 528, 40 A. L. R. 599, Note (1925) 11 Ia. L. Rev. 73.

For further discussions of this problem see Note (1931) 29 Mich. L. Rev. 487; Holland, R. B., Risk of Loss and Insurance in Contracts for the Sale of Real Estate (1927) 5 Tex. L. Rev. 249; McClain, E., Insurance of Limited Interests Against Fire (1898) 11 Harv. L. Rev. 512; Vanneman, H. T., Risk of Loss in Equity Between the Date of Contract to Sell Real Estate and Transfer of Title (1924) 8 Minn. L. Rev. 127 at page 137 and ff.; Pepper, George W., The Rights of Vendor and Vendee in Respect of a Policy of Insurance Upon Property Sold (1894) 33 Amer. L. Reg. 134; Note on the Extent of Recovery where the Insured has a Limited Interest, 68 A. L. R. 1344.

In Germany the rule prevails that upon a transfer of insured property all rights and liabilities arising out of the contract of insurance pass to the transferee. See Prof. E. W. Patterson's enlightening discussion, comparing the social convenience of the German rule with that of the American rule, The Transfer of Insured Property in Germany and in American Law (1929) 29 Colum. L. Rev. 691.

If the risk of loss has passed to the grantee, and the grantor may still avail