Jeffrey Lebowski (The Dude) is interested in purchasing a new, one of a kind bowling ball. The Dude obtains a loan from First Bank and agrees to give the bank a security interest in his rug, which really ties the room together. The bank files a financing statement, which includes the correct names of the debtor and secured party, a sufficient indication of the collateral, the correct address of the secured party, and the status of The Dude as an individual. However, the bank incorrectly listed The Dude’s address as 2710 Wellington Way, which is actually the address of another Jeffrey Lebowski in town (The Big Lebowski).

The Dude decides he also needs to finance his purchase of some sweet new bowling shoes, and therefore tries to borrow the money from his friend Walter, proposing to give Walter a security interest in the same rug. Although Walter finds a financing statement for a debtor named “Jeffrey Lebowski,” further investigation reveals that the address listed is the address for The Big Lebowski (also known to be a collector of rugs), and not The Dude. Therefore, Walter concludes that the financing statement he found on the record actually covered The Big Lebowski, and not the Dude. Walter then loans the money to The Dude, takes a security interest in the rug, and files a proper financing statement covering the rug.

Which statement is correct?

1) First Bank’s security interest is unperfected because the filing office was required to reject the financing statement.

2) First Bank’s security interest is subordinate to Walter’s security interest because Walter gave value in reasonable reliance upon the incorrect address.

3) Walter’s security interest is subordinate to First Bank’s security interest, even though the financing statement contains an incorrect address for the debtor.

4) Walter’s security interest is subordinate to First Bank’s security interest because First Bank’s financing statement contains the minimum amount of information required to perfect a security interest.