Philippine Free Press , Inc. vs Court of Appeals G.R. No. 132864 | October 24, 2005 | J.

Garcia Background Information: Petitioner is a domestic corporation engaged in the publication of Philippine Free Press Magazine, one of the . . . widely circulated political magazines in the Philippines during the 60s. In 1963, Phil Free Press purchased a parcel of land and constructed a building therein which later on became the companys main office. In the 1965 Presidential Elections, Phil Free Press supported the late President Diosdado Macapagal against then Senate President Ferdinand Marcos. Upon the election of Marcos, Phil Free Press printed numerous articles exposing corruption and abuses of the Marcos Regime and the plan of the Marcoses to impose a dictatorship in the guise of Martial Law. In September 20, 1972, the soldiers of Marcos seized control over the main office of Phil Free Press and padlocked the establishment after forcing out its employees at gunpoint. Teodoro Locsin Sr., the President of the company, was informed that Martial Law had been declared and that Marcos instructed the soldiers to close the printing press. After the printing press was forcibly closed, Locsin was arrested and was locked up in a maximum security block at Fort Bonifacio. He was later on released subject to certain conditions; the one related to the printing press is that he was not to publish the Philippine Free Press. Since the publication of the Philippine Free Press ceased, the property remained locked up and under heavy military guard. The cessation of publication led to the financial ruin of the company. The situation was further aggravated when the employees demanded for the payment of their separation pays as a result of the closure of the company. Also, the minority stockholders demanded that Locsin buy out their shares.

Facts: 1. In early 1973, Locsin was approached several times by Marcos representatives with offers to buy the Philippine Free Press, Inc. However, Locsin declined the offer stating that it was not for sale. 2. In mid 1973, Locsin was again contacted but this time, by Brig. General Hans Menzi, concerning the sale of the PFP, Inc. They held a meeting at the building of the company and there, Menzi reiterated the offer to buy the property once again, asserting that Marcos cannot be denied. Locsin then made a counteroffer that he will sell everything but that he will be allowed to keep the name of PFP, Inc. 3. Menzi contacted Locsin thereafter informing the latter that Marcos was amenable to the counteroffer and is offering the purchase price of P5,750,000.

4. In August 1973, Menzi tendered a check for P1,000,000 to Locsin for

the downpayment of the sale and the latter accepted the same.
5. In October 1973, Menzi paid the balance of the purchase price and the

parties executed 2 notarized deeds of sale of the property in dispute.

6. Locsin used the proceeds of the sale to pay the separation pays of the

employees and to buy out the shares of the minority stockholders of the company. 7. In February 1987, PFP filed a complaint for Annulment of Sale on the grounds of vitiated consent and gross inadequacy of the purchase price. Issue: 1. Does the gross inadequacy of the purchase price indicate vitiation of consent to the contract of sale which would make the sale voidable? 2. Does the utilization of the proceeds of the sale constitute as implied ratification of the sale? Held: On both counts, no. The Supreme Court dismissed the petition. Ratio: Gross inadequacy of the purchase price does not, as a matter of civil law, per se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:
1.

Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.

Following the codal provision, petitioner must first prove a defect in the consent, failing which its case for annulment contract of sale on ground gross inadequacy of price must fall. The categorical conclusion of the Court of Appeals, confirmatory of that of the trial court, is that the price paid for the Free Press office building, and other physical assets is not unreasonable determination, to justify the nullification as of the it sale. This were factual on predicated

offered evidence, notably petitioners Balance Sheet as of November 30, 1972 (Exh. 13), must be accorded great weight if not finality. (Balance Sheet indicates that the net book value of the Properties was actually only P994,723.66.)

2.

The Supreme Court reiterated the ruling of the Court of Appeals: In the case at bench, Free Presss own witnesses admitted that the proceeds of the 1973 sale were used to settle the claims of its employees, redeem the shares of its stockholders and finance the companys entry into moneymarket shareholdings and fishpond business activities (TSN, 2 May 1988, pp. 16, 42-45). It need not be overemphasized that by using the proceeds in this manner, Free Press only too clearly confirmed the voluntaries of its consent and ratified the sale. Needless to state, such ratification cleanses the assailed contract from any alleged defects from the moment it was constituted (Art. 1396, Civil Code).