Officials of Time Inc. reacted yesterday to a jury finding in their favor by contending that a Time magazine story linking former Israeli defense minister Ariel Sharon to a 1982 massacre of Palestinians essentially was true and that the case should never have reached court.

They entered the courtroom yesterday fearing that Sharon would win his libel suit. After the six-member jury earlier had ruled that the story had defamed Sharon and that it was false, one Time official said, "This jury has got used to voting against us."

But the jury threw the case out by finding against Sharon on the third major legal point -- whether the magazine had acted with "actual malice" and recklessly had published a story it knew or had reason to believe was false.

"I'm extremely happy that we won, but I'm not totally happy with the jury's earlier findings on defamation and on falsity because with all due respect to the jury, which worked very hard . . . I believe that they were wrong about defemation and the falsity," said Henry Grunwald, editor-in-chief of Time magazine. "We believe that our story was substantially true, but the important thing is that Mr. Sharon was not able to defeat us in an American court for his own purposes."

In a statement, Time officials contended that the suit was "brought by a foreign politician attempting to recoup his political fortunes" after an Israeli investigation had "found him guilty of indirect responsibility for the massacres at Sabra and Shatila and recommended his ouster as defense minister."

They contended that their defense was "severely hampered" by the Israeli government, which cited security concerns to prevent "key witnesses from testifying . . . and denied access to documents and testimony" that Time felt would have proved its case.

The jury ruled that Time correspondent David Halevy had acted "negligently and even carelessly" but that he thought his information was valid when he filed his story. Halevy testified in the trial that had had made an "evaluation" by "reading between the lines of the report" by an Israeli investigative commission.

Sharon's attorneys painted Halevy, a former Israeli army officer, as a political enemy of Sharon. They brought out in the trial that in 1979 Time had placed him on a year's probation for incorrectly reporting the gravity of former prime minister Menachem Begin's health and that Halevy's superior wrote that he might have been "inexcusably shoddy in his reporting."

News executives hailed the jury's findings but some questioned Time's editorial methods.

"In my opinion, there is no way that someone could libel almost anything said by someone like Gen. Sharon who has had a long and checkered past," said Harry M. Rosenfeld, editor of the Albany (N.Y.) Times Union and Knickerbocker News. "That said, this case showed that Time magazine has some very highly questionable editorial practices, including mind reading apparently . . . that we should all reject."

John B. Johnson, editor and publisher of the Watertown (N.Y.) Daily Times, concurred. "I'm not sure that Time had the most prudent journalism in the way they prepared the story," he said.

Others expressed relief that a precedent was not set. A finding for Sharon would have begun "the kickoff of an endless parade of libel suits," said William J. Woestendiek, executive editor of The Plain Dealer of Cleveland.

"We know that the financial and emotional burden of this libel suit was enormous, even for an organization with the stature and resources of Time," said Jack Landau, executive director of the Reporters Committee for Freedom of the Press. "That defense has sent a heartening message to both large and small publications: it is better to fight back than give up."