How would you deal with this?

[Lotto]

Hi, all. I'm a basketball official who is also a baseball fan. In a conversation this morning, a friend gave me the following high school baseball scenario and asked what the umpire should have done. I'd appreciate any help, with rule references.

Bases loaded, 1 out, 3-2 count. Batter check swings on pitch, umpire rules ball 4. Batter and runners start advancing. Catcher turns around and says that the ball was foul tipped into the catcher's glove. Umpire agrees and calls the batter out. Catcher then tags out the runner advancing from third. After a great deal of thought, the umpire decides his only choice is to rule the runner out as well.

Your thoughts? Thanks!!