OK, I see what they were getting at now. I see a few major problems here:
First of all, the call vs raise thing is only an issue because villain used $25 chips - if it had been a single oversize chip the extra would have correctly been returned and his action deemed a call. Here's the rule
14. String raises are not allowed. The dealer should enforce obvious infractions to this string-raise law without being asked. To protect your right to raise, you should either declare your intention verbally or place the proper amount of chips into the pot. Putting a full bet plus a half-bet or more into the pot is considered to be the same as announcing a raise, and the raise must be completed. (This does not apply in the use of a single chip of greater value.)
And there's this too, from the NL/PL section of the rules (http://www.homepokertourney.com/roberts-rules-of-poker.htm#SECTION_14_-_NO_LIMIT_AND_POT-LIMIT):
11. If a player tries to bet or raise less than the legal minimum and has more chips, the wager must be increased to the proper size (but no greater). This does not apply to a player who has unintentionally put too much in to call.
So what matters in this case is exactly
how much was in the stack of $25s that villain put out. If it was a full stack then it was $500 and yes, the dealer should have ruled it a raise and made him increase the amount to $550 total. If it was under $425 though ($300 + $125, half of your $250 raise), then it should have been ruled a call and the extra returned to him.
That's a whole other mess though. Did the floor end up ruling on exactly how much he'd bet? Did the dealer count the bet down and announce the amount?
Assuming the amount was
$425 or higher yes, the dealer did technically make an error by ruling it a call instead of an undersize raise that needed to be brought up to the correct amount... BUT we're making a big assumption there, and that's that both the villain and dealer knew you still had chips behind.
That brings up the second issue - there's an argument to be made that villain (and very likely the dealer too) didn't realise you still had chips behind at they time they were correcting his bet, because you had them in your hand. If the dealer, or villain, thinks you're all in for $300 then neither of them did anything wrong.
In fact, I think this has a lot to do with what happened. You say yourself, villain only acknowledged you still had chips after
the bet was corrected - at the time he thought he was calling an all-in (which would explain why everyone else at the table thought he was just calling too). And contrary to what you might think dealers don't keep track of exactly how much you're playing at all times. Nor are they expected to, in my experience.
So if you've made a substantial bet, and the dealer can't see your other chips because they're in your hand, they've probably assumed that you're all in and that's why the extra was returned to the villain - as far as the dealer knew, villain really had just put in too many chips to call an all-in bet.
Regardless of how it happened though, what I'm struggling to find is the precedent/rule for how to correct that error, given how the action went. There's this rule (http://www.homepokertourney.com/roberts-rules-of-poker.htm#BETTING_AND_RAISING) (again, emphasis added):
16. All wagers and calls of an improperly low amount must be brought up to proper size if the error is discovered before the betting round has been completed. This includes actions such as betting a lower amount than the minimum bring-in (other than going all-in) and betting the lower limit on an upper limit betting round. If a wager is supposed to be made in a rounded off amount, is not, and must be corrected, it shall be changed to the proper amount nearest in size. No one who has acted may change a call to a raise because the wager size has been changed.
I read that to mean that the mistake needs to be corrected before
the betting round has been completed - but once the betting round is over (when the dealer raps the table and deals the river, in this case) everyone's made their bed and they need to sleep in it.
That would make sense, as it's unfair to all the other players in the pot if they're required to make good on a mistake that happened much earlier in the hand. But it doesn't explicitly say that, it just implies it.
I also don't know what that would mean for the board cards - I would have thought that if you're going back to correct a betting error made on the turn, then a new river card needs to be dealt too (as the dealer has, effectively, dealt the river card prematurely).
SUPER-LONG STORY SHORT:
if villain did indeed put out $425 or more, and both the villain and dealer knew that you had chips behind, then the ensuing action is a gawdawful mess, and it seems like the casino staff piled mistake on top of mistake. I honestly have no idea how you're supposed to rectify it - there doesn't seem to be any explicit remedy in the rules.
If villain only put out $400 or less (and the villain/dealer both knew you had chips behind) then you 100% got screwed, the pot should have been yours because it's a clear bet-fold-show sick bluff situation on the river.
It seems the reality is somewhere in between those two situations though, buried under about a foot of mud :P So my advice is always leave your chips on the table in full view, and never expose your hand until you have to at showdown.
Originally Posted by Ricey07
Under what rules can a mucked/folded hand ever win a pot?
That'd be this rule (http://www.homepokertourney.com/roberts-rules-of-poker.htm#DEAD_HANDS):
2. Cards thrown into the muck may be ruled dead. However, a hand that is clearly identifiable may be retrieved and ruled live at managementís discretion if doing so is in the best interest of the game. An extra effort should be made to rule a hand retrievable if it was folded as a result of incorrect information given to the player.
This does actually all hinge on how the casino rules on the turn action - if it's ruled that the villain had incorrect information (assuming that you were all in, or not knowing that his turn bet had been ruled a raise and he'd actually put you
all in, for example) then the floor is correct to unmuck his hand and award him the pot.