1. Pedro Gil formed a limited partnership with his father-in-law, Vicente Cruz, to open an upscale Filipino restaurant in a China town. Mr. Gil was the general partner and owned 75 percent of the business. Mr. Cruz, with 25 percent ownership, was the limited partner and invested Php100,000. After one year, difficulties in the restaurant's operation caused business to drop off, and Mr. Gil called Mr. Cruz for advice. After hearing of the difficulties, and concerned with the security of his investment, Mr. Cruz traveled from Davao City to Manila to visit the operation. Upon observing the operation for two days, the two partners decided to launch a large and expensive television ad campaign to increase flagging sales. Mr. Cruz designed the campaign with the help of Sparkling Advertising and Video, a local advertising agency specializing in television commercials. Despite an immediate increase in sales, volume continued to decline, and finally, three months after the ad campaign was launched, the restaurant closed its doors. Total debts at the time the restaurant closed equaled Php400,000, with assets of the partnership only being Php200,000. Included in the debt was Php150,000 owed to the advertising agency. The agency sought payment directly from Mr. Cruz. Mr. Cruz claimed that his liability was limited to the Php100,000 he had previously invested in the business, and refused to pay any additional money. The Sparkling Advertising Agency sued the limited partnership, as well as Pedro Gil and Vicente Cruz individually. By hiring the advertising agency, did Mr. Cruz forfeit his limited partner status? Why? Is Mr. Cruz liable for the outstanding debts of the limited partnership? Why?

1. Pedro Gil formed a limited partnership with his father-in-law, Vicente Cruz, to open an upscale Filipino restaurant in a China town. Mr. Gil was the general partner and owned 75 percent of the business. Mr. Cruz, with 25 percent ownership, was the limited partner and invested Php100,000. After one year, difficulties in the restaurant's operation caused business to drop off, and Mr. Gil called Mr. Cruz for advice. After hearing of the difficulties, and concerned with the security of his investment, Mr. Cruz traveled from Davao City to Manila to visit the operation. Upon observing the operation for two days, the two partners decided to launch a large and expensive television ad campaign to increase flagging sales. Mr. Cruz designed the campaign with the help of Sparkling Advertising and Video, a local advertising agency specializing in television commercials. Despite an immediate increase in sales, volume continued to decline, and finally, three months after the ad campaign was launched, the restaurant closed its doors. Total debts at the time the restaurant closed equaled Php400,000, with assets of the partnership only being Php200,000. Included in the debt was Php150,000 owed to the advertising agency. The agency sought payment directly from Mr. Cruz. Mr. Cruz claimed that his liability was limited to the Php100,000 he had previously invested in the business, and refused to pay any additional money. The Sparkling Advertising Agency sued the limited partnership, as well as Pedro Gil and Vicente Cruz individually. By hiring the advertising agency, did Mr. Cruz forfeit his limited partner status? Why? Is Mr. Cruz liable for the outstanding debts of the limited partnership? Why?