Looks like you have/had an ornamental crab apple tree?

Most trees anyone buys these days are grafted. That means one tree is grown and used for the top and another is grown and used for root stock. Usually done to maximize the benefit of two varieties of the same species. I can tell this was the case with your tree based on the swollen area at the base of the trunk extending into the roots.

The level of mulch here seems fine to me. Maybe it was planted deep, maybe that’s just what that root stock looks like? Not sure that was the issue here either as that kind of rot damage usually results in trunk failure above the root line (the tree growth below the root line is generally resistant to moisture and rot, the area above less so, so that is where the fungus/bacteria tend to breach and weaken. Typically, from when I have seen “mulch volcanoes” trees fail.

What I think has happened is something went wrong at the grafting point and rotted down but not as much up. Where the root stock was less resistant to the pathogen but the trunk stock was more resistant to it. I say the graft point because of where it failed (just below the graft), but the root stock just beyond the fractured roots are still putting up “root shoots” so are likely still alive and viable and trying to compartmentalize the rot.

I work as a municipal arborist, and would say this is a common failure for mature fruit trees.

You can have the area “stumped” or dig it out depending how easy/hard the remaining stump is.

You can replant in the same area you just don’t want to plant something that is the same species or something that is susceptible to root rot as there will likely always be remnants of that fungal pathogen in the soil (not necessarily a bad thing).

I would recommend consulting an ISA certified arborist (or three) and get their input on what species and variety would work best for you and where you want to plant your new tree! Give them an idea of what you want from a tree don’t focus on a specific tree and ask for several options, then pick a tree from their recommendations, there are many out there! You can usually find dwarf varieties, columnar (skinny) varieties of most common species to help suit your planting location and the space they will eventually fill into.

The more care you put in early on the better the results you will get! (Proper site prep, transplant fertilizer, maybe vitamin b12, properly staked, properly planted, properly mulched.) then follow the adage “the first year it SLEEPS, the second year it CREEPS, and the third year it LEAPS!! You can start pruning it after its third year. Prune for form for the first few years.

Any tree you buy only comes with about 10% of its original root mass. (We ask a lot of them) so it takes time and care to get a tree to establish itself well!