This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




American Iron & Supply Company,



St. Paul Terminals, Inc.,


AMG Resources NW Corporation,


Filed September 8, 1998


Harten, Judge

Ramsey County District Court

File No. C6-97-1190

Frank R. Berman, Julia A. O'Brien, Frank R. Berman, P.A., 510 Marquette Avenue South, Suite 200, Minneapolis, MN 55402 (for appellant)

Kari S. Berman, Kari S. Berman, P.A., 510 Marquette Avenue South, Suite 200, Minneapolis, MN 55402 (for appellant)

Bradley J. Martinson, Attorney at Law, 520 Marquette Avenue, Suite 900, Minneapolis, MN 55402 (for respondent St. Paul Terminals)

John F. Bonner, III, Malkerson Gilliland Martin LLP, AT&T Tower, Suite 1500, 901 Marquette Avenue, Minneapolis, MN 55402-3205 (for respondent AMG)

Considered and decided by Schumacher, Presiding Judge, Short, Judge, and Harten, Judge.



Appellant American Iron and Supply Co. (AIS), which held an option to purchase real property owned by respondent St. Paul Terminals, Inc. (SPT), challenges the district court's determination that respondent AMG Resources Northwest Corp. (AMG) properly exercised its right of first refusal to purchase the property. We affirm.


SPT owns a parcel of real property known as the "Marine Terminal" in St. Paul. In 1989, AMG entered into an agreement with SPT to lease a portion of the Marine Terminal.

The lease also provided AMG an option to purchase the entire Marine Terminal. Additionally, section 37 of the agreement, "Future Leases and Mortgages," provided:

A. * * * Landlord will not enter into any Lease or other arrangement with any existing or future tenant for any part of the Marine Terminal without first obtaining the Tenant's consent. Provided such lease is arrived at in a bona fide arm's length transaction, and that the rents provided therein are at or above market, Tenant will not unreasonably withhold its consent. In each instance, Tenant's response to any proposed Lease or modification of Lease by Landlord will be given within five (5) business days of the providing to the Tenant of the complete terms and conditions proposed.

B. The Tenant shall have a right of first refusal on other space within the Marine Terminal. In the event the Landlord receives an offer from a prospective tenant for space within the Marine Terminal that the Landlord deems acceptable, Landlord shall provide a written copy of that offer to the Tenant and the Tenant will have ten (10) business days within which to deem the offer to have been made by the Landlord to the Tenant and to accept in writing the same on the same terms and conditions as provided in the offer from the third party.

On January 4, 1996, SPT notified AMG that it was going to enter into an option agreement with AIS. On January 10, AIS purchased an option to either buy or lease the Marine Terminal. The option agreement provided at section 1b:

Upon execution of this Agreement and in consideration therefor, AIS will pay to SPT an up-front, non-refundable $60,000 option payment, except as otherwise provided herein. If AIS and STP come to terms relating to a lease or sale, this $60,000 option money shall be applied to the lease or purchase payment amount. This amount will be fully refundable if AMG Resources, a tenant on a portion of the Property with an option to purchase all or a portion of the property and the right to restrict SPT from renting a portion of the Property to competitors of AMG, exercises its options under its Lease which may not permit SPT to either lease or sell SPT's interest in the Property to AIS.

Section 3a of the option agreement provided terms pursuant to which AIS could purchase "all of SPT's interest in the Property." Section 3b governed AIS's option to lease and provided:

AIS would have the option to lease the Property for a period of three years, commencing on August 1, 1996, through July 30, 1999, subject to current leases in effect with current tenants at the time this option agreement is executed. AIS would have full rights to use that portion of the Property currently occupied by SPT in the ordinary course of their business. AIS will pay to SPT as and for rent for the entire property the sum of $30,000 per month, with the first payment due on August 1, 1996, and the first of each month thereafter until July 1, 1999.

At section 4a the agreement provides:

AIS must deal directly with AMG Resources with regard to any rights AMG may have to purchase the Property. AIS agrees to indemnify and hold SPT harmless for any and all claims arising from AMG, and its successors and assigns, which result from any conduct or acts taken by AIS in connection with its dealings with AMG.

On June 28, 1996, AIS notified SPT that it intended to exercise its option to lease the Marine Terminal. On July 1, SPT notified AMG that AIS had exercised its option and requested AMG's consent or an exercise of its first refusal rights. On July 5, AMG notified SPT that it was withholding its consent (pending receipt of additional details about the lease) and reserving its right of first refusal. On July 19, SPT sent AMG a copy of the proposed lease.

On July 25, AIS sent SPT a letter stating that section 3b of the option agreement contained all the terms of the lease. The letter also indicated that AIS intended to take possession of the property on August 1. SPT forwarded the letter to AMG and requested AMG to respond regarding its consent or right of first refusal. On July 29, AMG refused to consent. On August 1, SPT again requested that AMG either consent to the lease or exercise its right of first refusal. On August 6, AMG exercised its right of first refusal, tendered the first month's rent, and took possession of the entire Marine Terminal.

AIS brought an action against SPT and AMG alleging that SPT breached the option agreement and that AMG tortiously interfered with the SPT/AIS business relationship. Also, as an alleged third-party beneficiary of the lease between AMG and SPT, AIS contended that AMG breached its agreement not to withhold unreasonably its consent. AIS sought specific performance of the option agreement and money damages.

The district court granted summary judgment in favor of SPT and AMG on two alternative bases. First, the district court held that AIS failed to secure the consent of AMG or to deal with AMG as required in section 4a of the option agreement. Second, the district court held that AMG did not receive the full terms of the proposed lease as required to trigger the running of its time to consent or exercise first refusal; in any event, when SPT demanded such decision, AMG timely responded. This appeal followed.


The standard for reviewing a district court's ruling on summary judgment is de novo. Zip Sort, Inc. v. Commissioner of Revenue, 567 N.W.2d 34, 37 (Minn. 1997). Summary judgment is appropriate when the moving party demonstrates that the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine issue as to any material fact and that either party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. "A party opposing summary judgment must offer significant, probative evidence in opposition, not merely show that there is some metaphysical doubt as to a material fact." St. Paul Fire & Marine Ins. Co. v. Metropolitan Urology Clinic, P.A., 537 N.W.2d 297, 300 (Minn. App. 1995). Contract interpretation is subject to de novo review. Hertz Corp. v. State Farm Mut. Ins. Co., 573 N.W.2d 686, 688 (Minn. 1998).

1. AIS Standing as Third-party Beneficiary

We will affirm a district court's summary judgment if the decision is correct on grounds other than those cited by the district court. Northway v. Whiting, 436 N.W.2d 796, 798 (Minn. App. 1989). Thus, if AIS lacks third-party beneficiary standing to challenge the timeliness of AMG's exercise of its rights under its lease with SPT, we may affirm on that ground.

A third party can establish third-party beneficiary status and associated rights by showing that the contracting parties intended to benefit the third party at the time the contract was executed. Julian Johnson Constr. Corp. v. Parranto, 352 N.W.2d 808, 811 (Minn. App. 1984). Unless the contract expresses the parties' intent to benefit a third party through contractual performance, the third party is no more than an incidental beneficiary and cannot enforce the contract. Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn. App. 1987). "Generally, when there is no reference to the third party in the contract, there is no intent to benefit the third party." 614 Co. v. Minneapolis Community Dev. Agency, 547 N.W.2d 400, 410 (Minn. App. 1996). "But the absence of the third party's name does not preclude a finding of intent to benefit a third party `if the circumstances show otherwise.'" Id. (quoting Julian Johnson Constr. Corp., 352 N.W.2d at 811).

A third party may recover as an intended beneficiary by satisfying either the "intent to benefit" or "duty owed" test. Chard Realty, Inc. v. City of Shakopee, 392 N.W.2d 716, 720 (Minn. App. 1986), review denied (Minn. Nov. 19, 1986). To establish intent to benefit, the contract must express some intent by the parties to benefit the third party through contractual performance. Id. "To establish a duty owed, the promisor's performance under the contract must discharge a duty otherwise owed the third party by the promisee." Id.

Here, AIS is not directly mentioned in the SPT-AMG lease and therefore is presumptively only an incidental beneficiary of the limitations on AMG's rights to withhold consent or exercise first refusal. There is no evidence that the SPT-AMG lease terms were intended to benefit AIS; no genuine fact issue has been raised under the "intent to benefit" test. Nor is there evidence showing that SPT owed a duty to AIS to ensure that AMG responded within the time requirements specified in the SPT-AMG lease so as to create a genuine fact issue under the "duty owed" test. Accordingly, we conclude that AIS had no standing to challenge the propriety of AMG's exercise of its rights under the SPT-AMG lease. Because we hold that AIS had no standing to challenge AMG's compliance with the timing requirements of the SPT-AMG lease, we need not consider the alternative bases for summary judgment utilized by the district court.[1]

2. Claimed Tortious Interference with Contractual Rights

AIS argues that a fact issues exists as to whether, in exercising its first refusal rights, AMG tortiously interfered with the contractual rights of AIS.

Ordinarily, whether interference is justified is an issue of fact, and the test is what conduct is reasonable under the circumstances. Kjesbo v. Ricks, 517 N.W.2d 585, 588 (Minn. 1994). The burden of proving justification is on the defendants. Id.

There is no wrongful interference with a contract where one "asserts in good faith a legally protected interest of his own * * * believing that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction."

Id. (quoting Restatement (second) of Torts § 773 (1979)).

In Ludowese v. Redmann, 479 N.W.2d 59 (Minn. App. 1991), review denied (Minn. Feb. 10, 1992), we held that, absent other allegations of tortious interference, the mere exercise of a prior right of first refusal was, as a matter of law, justified interference with an agreement to sell real property. Id. at 63. In Ludowese, the refusal right arose from a statute that allowed owners of family farms a right of first refusal against creditors' proposed sales of their property. We so held notwithstanding that the owners acted as "straw men" and subsequently reconveyed the property to another purchaser. Id. at 61-62.[2]

Here, there is no evidence of malicious activity that could support the AIS contention that AMG's exercise of its right of first refusal was tortious interference. We conclude that the district court properly awarded summary judgment on this issue.

3. Discovery

AIS argues that the district court abused its discretion in refusing to allow AIS to undertake further discovery before ruling on the summary judgment motion. A district court has broad discretion to supervise discovery and, absent clear abuse of that discretion, its orders will not be disturbed. Kellar v. VonHoltum, 568 N.W.2d 186, 190 (Minn. App. 1997), review denied (Minn. Oct. 31, 1997). There is a presumption in favor of granting a request for a continuance to allow additional time for discovery. Cherne Contracting Corp. v. Wausau Ins. Cos., 572 N.W.2d 339, 345 (Minn. App. 1997), review denied (Minn. Feb. 19, 1998). But the court should consider whether the party seeking the continuance has been diligent and has a good-faith belief that material facts will be uncovered. Id. The court should refuse to grant a continuance if the requesting party seeks to engage in a "fishing expedition." Id. at 345-46.

AIS's motion to compel discovery was an effort to discover evidence of an agreement between AMG and Cargill/Northstar Steel whereby Cargill/Northstar Steel would pay AMG to refuse to consent to AIS's use of the property. AMG opposed the discovery, arguing that if the district court determined that AMG properly exercised its right of first refusal, the proposed discovery would be irrelevant. In denying the motion to compel, the district court did not state its reasons. Nevertheless, because we agree that AMG lawfully exercised its contractual right of first refusal, the district court did not abuse its discretion in denying AIS's motion to compel. AMG was legally entitled to do what it did.

4. Motion to Amend Complaint

AIS argues that the district court abused its discretion in refusing to allow AIS to amend its complaint to add more counts.

We will not reverse a trial court's denial of a motion to amend a complaint absent a clear abuse of discretion. Hunt v. University of Minn., 465 N.W.2d 88, 95 (Minn. App. 1991). A district court should freely grant motions to amend when justice requires. Id. A motion to amend a complaint properly may be denied, however, when the additional claim could not survive summary judgment. CPJ Enterprises, Inc. v. Gernander, 521 N.W.2d 622, 625 (Minn. App. 1994).

The district court denied AIS's motion to add four counts. The first two proposed counts dealt with SPT's return of AIS's $60,000 option consideration in the event AIS is determined not to be entitled to the property. The record contains indication that AIS refused to accept SPT's tender of that refund. The district court may have assumed, as do we, that if AIS refused the refund, it did so to avoid any compromise of its position on the merits of the case pending completion of the judicial process in either the trial court or an appellate court. The district court also may have assumed, as do we, that given a final judgment at whatever level, the parties will promptly fulfill in good faith whatever contractual obligations derive from that final judgment, thereby avoiding the necessity of post-judgment proceedings.

The third and fourth proposed counts, respectively, allege that because AMG's exercise of its right of first refusal was untimely, it is a nullity and AIS's interest in the property is superior to the rights of AMG. These claims substantially replicate appellant's original complaint claims that the district court considered and decided.

We conclude that the district court did not abuse its discretion in denying appellant's motion to amend its complaint.


[1] The third-party beneficiary issue was presented to the district court and was fully briefed in this court. The district court, however, did not rule on the issue in its summary judgment order.

[2] In Kjesbo, under similar facts but under a statute by then amended, this court held the opposite--that the exercise of the first refusal right was unjustified, because a statutory amendment had become effective which prohibited subsequent "straw man" transfers for 270 days after the exercise of the first refusal right. 517 N.W.2d at 589-90.