Has John violated his transfer warranty to St. Joseph?
John and Nancy Augustine hired Hanover Homes to build a house. They took out a construction loan from South Bend Bank. When directed by the Augustines, South Bend would issue a check payable to John, Nancy, and Hanover; John and Nancy would indorse it and deliver it to Hanover. However, there was one check that John indorsed and delivered to Hanover without Nancy's indorsement. Hanover deposited the check in its account at St. Joseph Valley Bank. Hanover then filed for bankruptcy. South Bend discovered the missing indorsement and demanded repayment from St. Joseph. Although St. Joseph could have demanded repayment from Hanover, there was no point since Hanover was bankrupt. So, instead, St. Joseph demanded repayment from Nancy and John. The lower court held that John was liable to St. Joseph as an indorser and for violating his transfer warranties. John appealed.