As lawyers assembled closing documents for a refinancing of some of the outstanding debt of United States Lines (USL), a secretary working on “Amendment No. 1 to the First Preferred Ship Mortgage” omitted three zeros from the number representing USL’s outstanding indebtedness to Prudential Insurance. As a result, the document showed the amount of Prudential’s first mortgage as “$92,855.00” instead of “$92,885,000.00.” No one noticed the error until eight months later when USL defaulted on the notes secured by the amended mortgage and went bankrupt.

When Prudential tried to foreclose its $92,885,000 first mortgage, USL’s bankruptcy trustee objected, arguing that the mortgage should be limited to $92,885. In addition, General Electric Capital Corporation (GECC), which had lent money to USL secured by a second mortgage, brought suit for a declaration that Prudential’s first mortgage was valid only to the extent of $92,855. Because GECC had lent money to USL secured by a mortgage junior to that to Prudential, GECC stood to gain by reducing the value of Prudential’s first mortgage.

GECC had been intimately involved in USL’s financing for some years and knew that Prudential had a $92,885,000 first mortgage. Neither GECC nor any other creditor of USL asserted that it had relied on erroneous information about the amount of USL’s outstanding debt.

If you had been the manager of GECC in charge of the USL account, what would you have done once the typo was discovered? Is Prudential legally entitled to a $92,885,000 first mortgage? What would be the ethical thing to do? [See Andrew Kull, Zero-Based Morality: The Case of the $31 Million Typo, 1 Bus. L. Today 11 (July–Aug. 1992).]