Appeal from the Circuit Court of the United States for the District of Oregon.

Suit in equity by H. E- Pittock and Georgiana Pittock against J. Whyte Evans and W. D. Wood. Decree for complainants, and defendants appeal.

The appellees were complainants in the court below, and by ¿heir bill sought to obtain a decree canceling a certain written lease and directing the defendants to the suit, who are the appellants here, to surrender the lease for cancellation.

The bill alleged that on the 23d of February, 1907, the complainants were the owners in fee of a certain block of land in the city of Portland, Or., known as block numbered 215, and leased the same to the defendant Evans for the period extending from February 1, 1907, to December 31, 2005, at agreed specified rentals payable in monthly installments in advance, which rentals aggregated $30.000 per year from February 1, 1907 to .January 1, 1917, and gradually Increased for different specified periods, reaching the aggregate sum of $103,568.10 per year from January 1, 1997, to December 33, 2005, in addition to the agreed payment by the lessee during the entire term of ‘‘all rates, taxes, charges and assessments for revenue and otherwise, general and special, ordinary and extraordinary of every nature and kind whatsoever, including water rates, which may be taxed, charged, assessed, levied or imposed during the continuance of said lease on the premises therein demised, and upon any and all buildings or improvements thereon of any kind which were then upon or which might after the date of said lease and before its expiration be erected, made or placed upon said demised premises, and upon the leasehold estate granted in said lease,” and that' the lessee “would keep said property free from all liens of every kind and description that may have priority over the title or interest of the lessors, and that a failure to pay and discharge any delinquent liens within sixty (60) days after demand for payment thereof made after delinquency by the lessors or their successors in interest, should be deemed a breach of covenant underpaid lease, and the lessors might at their option • then terminate said lease.”

The bill alleged that the agreement of lease contained this, among other, covenants:

“Fourth. The lessee further covenants and agrees to and with the lessors to erect, finish and complete upon said premises, at his own expense, a substantial, first-class, fireproof building or buildings, of steel or reinforced concrete construction, or a combination thereof, of the aggregate value of not less than $500,000.00, the construction of said building or buildings to be commenced on or before the 1st day of July, 1908, and to be prosecuted continuously and diligently until the completion thereof,- without interruption or delay save and except such interruptions or delays as may be caused by strikes, unavoidable delays in the securing or transportation of materials, delays resulting from the action of the elements or weather, or by any unavoidable casualty; said building or buildings as constructed to become security for the payment of the rent accruing under the terms of this lease, and for the fulfillment of all the conditions and covenants herein contained.” The lease further provided that, upon its expiration or other determination of the same, “all buildings, fixtures, and improvements then situated upon said premises should belong to and be the property of the said lessors without any payment therefor by them, and that the lessee would convey said building or buildings by good and sufficient conveyance to the lessors”; that no limitation should exist upon the right of the lessee or his successors to assign the lease or to sublet the whole or any part of the premises, with certain limitations not necessary to be stated; that all rents accruing under the lease and all proper advancements and payments made by the lessors thereunder “should be a first lien upon any and all buildings and improvements placed upon said premises at any time during the term of said lease and upon the leasehold estate created by said lease and upon the rents of all buildings and improvements placed or situated on said leased premises at any time during the term of said lease.”

The bill then set out the twenty-third, twenty-fourth, and twenty-fifth paragraphs of the lease, as follows:

“Twenty-Third. It is further understood and agreed that time is deemed and made the essence of this lease, and, if default shall be made in any or either of the- covenants herein contained to be kept by the said lessee and such default shall continue for sixty (60) days after notice thereof in writing by the said lessors to the said lessee, then and in case of such default the said lessors may at their election declare said lease terminated, and may re-enter ¿aid demised premises or any part thereof either with or without process of law, and may remove and expel from said premises the -said lessee and any and all persons occupying the same, and repossess and enjoy the said premises as of their former estate, and if, at any time, said lease shall be ended at such election, of the said lessors as aforesaid, the said lessee does hereby covenant and agree to surrender and, deliver up said above-described premises with all buildings and improvements situated thereon, peaceably to said lessors, immediately upon the termination of said lease as aforesaid and without any compensation being paid for any buildings or improvements placed thereon.

“Twenty-Fourth. It is hereby agreed that no waiver of a breach of any covenant or provision of this lease shall be construed to be a waiver of any succeeding breach of the same or any covenant or provision thereof.

“Twenty-Fifth. It is hereby mutually agreed that each of the expressions, phrases, terms, conditions, provisions, stipulations, agreements, and obligations of this lease shall extend to and bind or inure to the benefit of, as the ease may be or require, not only the parties hereto, but each and every of the heirs, executors, administrators, assigns and successors of the respective parties hereto, and wherever in this lease a reference to either of the parties hereto is made, such reference shall be deemed to include, wherever applicable, also a reference to the heirs, executors, administrators, assigns and successors of such party, the same as if in (ivory case expressed, and all the conditions and covenants contained in this lease shall he construed as covenants running with the land.”

Due execution and recording of the lease is then alleged, as well as its assignment in the year 1907 by Evans to the defendant Wood. It is then alleged that the defendants have failed, neglected, and refused to commence the construction of any building upon the leased premises or to take any steps towards such construction; that they have failed, neglected, and refused to pay any part of the rentals provided for in the lease “except the rentals falling due prior to September 1st, 1907, and the sum of §10,000.00 subsequently paid upon account”; that they have failed, neglected, and refused to pay the taxes assessed upon the premises for the years 1907 and 1908, amounting to §13,450.50, which amount the complainants were compelled to and did pay to prevent a sale of the premises for delinquent taxes. The eighth, ninth, and tenth clauses of the bill are as follows:

“(8) That on the 10th day of August. 1909, in accordance with the provisions of said lease, plaintiffs gave notice In writing to the defendant W. D. Wood that default had been made iu the covenants of said written agreement of lease to be kept and performed by the lessee named therein, and that if such default should continue for sixty (60) days thereafter that plaintiffs would declare said lease terminated; that notwithstanding said notice in writing a default in the covenants of said lease referred to in said notice has continued, and that no attempt has been made on the part of either of the defendants herein to carry out the provisions and covenants of said lease, but, on the contrary, further default has been made in the payment of taxes assessed against said leased premises.

“(9) That plaintiffs have declared said written agreement of lease terminated, and are now occupying said premises as of their former estate.

“(10) That no possession of said premises was ever taken by the defendants or any one under said lease, hut that notwithstanding that fact and the default, and failure, neglect, and refusal of the defendants in carrying' out the covenants of said lease, said defendants claim some interest in and to said leased premises under and by virtue of said lease adverse to the plaintiffs, which said lease is in the possession of the defendant W. D. Wood and constitutes a cloud upon .plaintiffs’ title to the real property hereinbefore described.”

No question is made by the answer of the defendants as to the ownership in fee by the complainants of the leased premises, nor in respect to the execution of the lease, a copy of which is annexed to and made a part of the answer, nor of its assignment by Evans to Wood.

The eighth paragraph of the answer is as follows:

“(8) For answer uuto paragraph 8 of the complaint, this defendant (Wood) admits that on the 10th day of August, 1909, the plaintiffs gave a notice in writing to the defendant W. D. Wood that certain defaults had been made in the covenants of said written agreement of lease to be kept and performed by the lessee named therein, and that if such default should continue for 60 (lays that plaintiffs would declare said lease terminated, but the defendant Wood denies Mint there was any default, or that, notwithstanding said notice iu writing, the default in the «mamuts in said lease referred to in said notice occurred or has continued, and this defendant denies that no attempt has been made on the part of either of the defendants herein to carry out the provisions in the covenants of said lease, but this defendant admits that the assessment of general taxes against the said property has not in fact been paid by either defendant, and defendant alleges the truth to be as is hereinafter more particularly set forth in articles 11 to 17 of this answer, both inclusive.”

Paragraphs 11 to 17 of the answer, both inclusive, are as follows:

“(11) And, further answering plaintiffs’ complaint herein, defendant alleges the truth and the facts to be as follows: That by and under paragraph fourteenth of said agreement of lease hereto annexed as Appendix‘A,’and specially referred to, it was provided as follows: ‘Fourteenth. The lessee shall on or before the 15th day of July, 1907. file with the lessors a bond in the amount of §150,000 with good and sufficient surety or sureties conditioned that the said lessee, liis assigns or legal representatives, will construct' a building or buildings upon said premises within the period and oí the kind herein provided, and will protect said property from any liens, claims or demands on account of material or labor and all demands of every kind and description on account of the construction thereof and pay the rental herein provided to be paid until the completion of said building and possession of said property shall be delivered to the lessee or his assigns upon the filing of said bond with the lessors.’ The defendant Wood avers that the bond mentioned in the said paragraph of the lease above set forth was duly and properly executed by the defendant W. D. Wood with the Trustee Securities Company, a corporation, as. surety; that the said the Trustee Securities Company are a good and sufficient surety, and that the said surety was satisfactory to and approved by the plaintiffs herein, and that the said bond, after being properly signed, sealed, witnessed, and executed and approved by the defendant Wood and the Trustee Securities Company, was duly delivered and accepted by the plaintiffs herein on July 10, 1907, and approved by them on July 16, 1907; that by the terms of the provisions of the lease hereto annexed as ‘Appendix A,’ and specially referred to, it was incumbent on the plaintiffs upon the execution and delivery of the said bond to deliver possession of said property to the lessee or his assigns, but this defendant has never been put in possession of said property. Neither has possession been tendered to him, but, on the contrary, the plaintiffs and each of them have wholly failed and neglected, and ever since have wholly failed and neglected, to deliver possession of the said premises to the defendant or to any one in his behalf, but, on the contrary, the said plaintiffs continued to hold and now hold possession of the said premises. The defendant W. D. Wood avers that the plaintiffs herein have since July 10, 1907, occupied and still occupy said premises as tlieir sole and only family residence; that the plaintiffs have since July 10, 1907, maintained fences around all of the said premises, and have continuously and exclusively inclosed the same during all of the time since said date, to wit, July 10, 1907, occupied, cultivated, and used said premises and the whole thereof, except that- portion occupied by other buildings as hereinafter set forth, as a garden, orchard, and lawn. The defendant W. 1). Wood avers that, in addition to the residence building occupied by the said plaintiffs on said premises as above set forth, there has been on said premises ever since July 10, 1907, and there now is, the additional residence building which this defendant alleges upon information and belief has been ever since' said date, to wit, July 10, 1907, leased by said plaintiffs to other parties unknown to this defendant for a valuable consideration unknown to this defendant, which valuable consideration has been received and retained by the plaintiffs herein. This defendant further avers that the plaintiffs have made no accounting; neither have they offered to make an accounting for the value and use of the said premises since July 10, 1907, but, on the contrary, have retained and controlled the said premises to their exclusive use and enjoyment, and have received and accepted all of the profits accruing from the said premises since July 10, 1907, without any accounting therefor to the defendant W. D. Wood.

“(12) That by and under the terms of said agreement of lease hereinafter more specifically set out and attached hereto as ‘Appendix A,’ and specially referred to, it was provided by paragraph seventeenth as follows: ‘Seventeenth. It is further understood that the lessors shall have the privilege of removing, at their own cost, any building or buildings now upon said premises as they may desire or any other material therefrom, or any of the trees or shrubbery thereon, but that such removal shall be made so as not to interfere with the excavation for the foundation of the building or buildings to be constructed upon said premises.’ This defendant avers that by and under the paragraph in the lease above set forth the plaintiffs herein reserved the right to and were given the privilege of removing the buildings, trees, and shrubbery from the said premises, but these plaintiffs have never waived their said right in the premises, nor have they removed said buildings, trees, or shrubbery, but, on the contrary, the buildings, trees, and shrubbery are in the same condition and position that they were at the time of the execution of the said lease, and it would not be possible to remove said shrubbery except in the spring of the year for purposes of replanting, and the plaintiffs herein have never put the premises in such condition as is called for by the above paragraph of the lease so as to deliver possession of the said premises as was in this lease contemplated.

“(13) This defendant further alleges that since, to wit, the year 1908, inclusive, that he has been greatly interested and engaged1 in and that he is constructing in the city of rortland, Or., a large and costly building called the Olds, Wortman & King Building, and that he is now at this time engaged and occupied in constructing and erecting the said building; that, the said Olds, Wortman & King Building is a large five-story building covering a whole block of property bounded by Morrison street, Tenth street, Alder street, and West Bark street, all in said city of Portland, county of Multnomah and state of Oregon, and that said building is of costly construction; that the defendant herein, W. I). Wood, was greatly occupied in tlie financing, construction, and erection of the said Olds, Wortman & King Building, as plaintiffs well knew; that tlie years 1907, 1908, and part of 1909 were years of panic and financial stringency, and because of this fact and because of the construction of the said Olds, Wortman & King Building the said W. I). Wood, to wit, on December 28, 1908, and tlie J3th day of May, 1909, offered to the plaintiffs to release the plaintiffs herein from the said agreement of lease on the said described property, to wit, block 215 in the city of Portland, county of Multnomah and state of Oregon, and the defendant offered to cancel said lease, but the plaintiffs and each of them refused to cancel said lease, but, on the contrary, knowing of the financial stringency and tlie burdens upon W. 1). Wood as aforesaid, elected and agreed to continue said lease and to treat the same as of full force and effect except as to the conditions of time of performance, and to demand Hie payments due therejmder, but at no time offered to put defendants or either of them into possession, but, on the contrary, these plaintiffs have held and now continue to hold exclusive possession of the said premises, and these plaintiffs continue to enjoy and now enjoy file exclusive use and profits of said property.

‘•(14) That on the 9th day of August, 1909, tlie plaintiffs herein served on the defendant W. D. Wood a notice in writing that unless defendant completed and performed certain covenants of the lease, Including the erection of the building in said lease provided for, within (SO days from tlie date of said notice that suit would be begun to terminate all of the rights which the defendant had in tlie said leased properly herein more particularly described, and to cancel the said agreement of lease; that, by the terms of the said written agreement of lease, it was provided, among other things, that the building or buildings specified in said lease to be erected by the lessee was to be of fireproof construction and to lie of ilie value1 at least equal to 8500,-000,- and this defendant alleges that the notice and demand for the erection of such a building within 00 days, as specified in the notice and demand above described, was entirely inequitable, unreasonable, and physically Impossible; of accomplishment within the time specified and limiied by the notice. This defendant further avers that tlie notice aberre described was not served, neither was this suit begun in good faitli, hut was intended to surprise this defendant and force upon him a cancellation of said lease and a forfeiture of the moneys paid to the plaintiffs thereunder, and lfiaiutiffs so moved against defendant Wood because times have improved and Portland real estate values have suddenly greatly arisen, and plaintiffs liad encouraged defendants to continue under the burden of said lease during dull times, but sought to suddenly enforce a forfeiture of said lease that plaintiffs might reap the liroiit and advantage of said increased values, and the commencement of tills suit was intended to injure the credit of tlie defendant, and by the public notoriety and general knowledge of the public at large of the fact of the said suit to embarrass the defendant in the construction of the said Olds, Worr-man & King Building did injure tlie credit of the defendant, and caused much delay and complications in tlie conduct, of defendant's other business interests, and more particularly in the erection, construction, and completion of the Olds, Wortman & King Building, so that, defendant Wood has been and is damaged in the sum of 850,000.

“(15) This'defendant avers that block 215 in the city of Portland is property situated in the midst of the active retail district of the said city, and that, owing to tlie increasing population of the city of Portland and the enlargement of the retail business district of said city, the value of the said property, to wit, block 215 in the city of Portland, had, to wit, on October 21, 1909, suddenly and greatly increased in value at the time of the commencement of this suit, .and that said property is now worth nearly double the amount of its estimated value at the time that the said lease herein more particularly set out was entered into; that, as aforesaid, plaintiffs have acquiesced in all things done by defendant and refused to release defendant, and, as aforesaid, .the purpose of this suit is by surprise and sudden and inequitable advantage taken of the defendant to now deprive the defendant of the advantages of the said lease and cause him to forfeit and lose the valuable rights acquired under said lease, and to forfeit and lose the large sums of money which have been paid to the plaintiffs herein by defendant on account of said lease and accepted by said plaintiffs as sufficient performance by defendant on account of those things by him to be performed under said lease; that the plaintiffs refused, as aforesaid, to release this defendant from the terms and effect of said lease or to cancel the same when requested so to do during the times of depression and low value, but elected to continue the same in full force and effect and demanded the payments due thereunder; that said defendant because of the insistence of plaintiffs in holding the lease in full force and effect as aforesaid, and relying upon the promises of plaintiffs not to forfeit or cancel said lease, has, at great inconvenience and hardship to himself, paid to the plaintiffs large sums of money on account of said lease, to wit, more than $30,000, which said payments of money have been by plaintiffs accepted as payments on account of said lease, and said lease has been treated by plaintiffs and this defendant mutually at all times prior to the cpmmencement of this suit as in full force and effect and partly executed, and plaintiffs have encouraged defendant to believe that the express terms of said lease were waived, and 'that defendant would be protected in his interest in the premises, and defendant avers that it would be grossly inequitable to permit plaintiffs to recover any advantage by this suit or to deprive defendant of any right in the premises, and plaintiffs ought to be and are estopped from asserting any forfeiture of cancellation of said lease or taking any advantage in the premises.

“(16) The defendant W. D. Wood alleges that by reason of the fault of the plaintiffs as to delivery of possession of said premises, as is hereinbefore more particularly set forth, and by reason of the acquiescence of plaintiffs in the continuation of said lease and the waiver of its exact performance as to time of performance, and by reason of the other acts aforesaid by plaintiffs and defendant, herein more particularly set forth, that said defendant is clear and free of any default or breach of covenant under said lease as to the payment of rent or as to the payment of taxes or. assessments or as to the beginning the construction of a building or buildings on said premises or as to breach of any other requirement .or covenant under said lease, and defendant Wood alleges that the sums paid to plaintiffs were paid by him and accepted by the plaintiffs under the express understanding and agreement that defendant was not able to proceed under the provisions of said lease, but was, as aforesaid, in embarrassed circumstances financially, and that, by reason of said partial payments, the strict terms of said lease were abrogated as to time of performance, and defendant would be permitted to take up the performance under said lease after he was relieved of the immediate pressure upon him by reason of the general financial stringency and the construction of the said Olds, Workman & King Building. And the defendant W. D. Wood avers that he is now ready, willing, able, and anxious to proceed under and in accordance with the terms of said lease and with due and reasonable promptness to comply with all of the provisions and requirements of the said lease, provided the unqualified and unlimited possession of the said premises be delivered to him.

“(17) The defendant W. D. Wood further avers that he is ready, willing, and able and will abide by any decree made by this honorable court as to any sum or sums due from him to the plaintiffs herein on account of or because of any sums which may be due, owing, and payable from him to the plaintiffs or to either of them, or any other act or thing which this court may decree he ought to do or perform, and defendant Wood avers that it would be grossly inequitable to permit the plaintiffs to cancel said lease and refuse to permit defendant to,perform thereunder, at the same time to forfeit and retain the said moneys, to wit, $-, paid to plaintiffs by defendant in per formance oí said lease and accepted by plaintiffs as aforesaid.”