Phil Free Press Inc vs CA

Philippine Free Press , Inc. vs Court of Appeals G.R. No. 132864 | October 24, 2005 | J. Garcia Background Information: Petiti Petitione onerr is a domest domestic ic corpor corporati ation on engage engaged d in the public publicati ation on of  Phil Ph ilip ippi pine ne Free Free Pres Press s Maga Magazi zine ne,, one one of the the . . . wide widely ly circ circul ulat ated ed political magazines in the Philippines during the 60’s. In 1963, Phil Free Press purchased a parcel of land and constructed a building therein which later on became the company’s main office. In the 1965 Presidential Elections, Phil Free Press supported the late Pres Presid iden entt Dios Diosda dado do Maca Macapa paga gall agai agains nstt then then Sena Senate te Pres Presid iden entt Ferdinand Marcos. Upon the election of Marcos, Phil Free Press printed nume numero rous us arti articl cles es expo exposi sing ng corr corrup upti tion on and and abus abuses es of the the Marc Marcos os 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 forc forcin ing g out out its its empl employ oyee ees s at gunp gunpoi oint nt.. Teod Teodor oro o Locs Locsin in Sr., Sr., the 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. •

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Facts: early y 19 1973 73,, Locs Locsin in was was appro approac ache hed d seve severa rall time times s by Marc Marcos’ os’ 1. In earl repr repres esen entat tativ ives es with with offe offers rs to buy buy the the Ph Phil ilip ippi pine ne Free Free Pres Press, s, Inc. 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,

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sale.

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offered evidence, notably petitioner’s 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 Press’s 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 company’s 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).