You have >>THE<< classic symptom of impending master cylinder failure.

The master cylinder is simply a linear fluid pump...actually, there are two pumps, one behind the other in the same cylinder. The piston that the motion of the brake pedal pushes (with added energy from the power booster) has a rubber lip seal around it to seal fluid pressure into the chamber when it is applied. This pressure is then transferred to the calipers by metal tubing and flexible hoses. The end of the piston has a one way valve in it so the piston can return to its non-applied position without causing low pressure (vacuum) behind the seal which would draw in air and moisture.

The one-way check valve closes immediately upon moving the master cylinder pushrod so that piston motion causes pressure build-up.

A common wear failure is slight abrasion of the cylinder surface and loss of the sharp edge (like a windshield wiper blade) of the piston seal. This usually shows up as a slow sinking of the pedal with steady light pressure...like at a traffic light.

The check valve on the piston must close EVERY time the pedal is applied or preesure cannot be created in the chamber. Wear or dirt can cause this valve to mis-seat on occasion. The next stroke of the pedal almost always works properly, as if nothing wrong ever happened. This probably describes what happened to you.

Chances are, the pedal didn't really go to the floor. You were so startled by the loss of backpressure, you did not push far enough to engage the second system while one was missing. They uses each other for operation and the odds are astronomical that BOTH failed simultaneously. BTW, this is exactly why there are two separate braking systems in the car.

The very first time this happens is the "you've been warned" sign. Your mechanic was wrong for pronouncing the brakes "normal" after telling him that the pedal dropped, but absolutely right for replacing the part that would (almost guaranteed) pull the same stunt again.

Missing fluid; not the source of the pedal loss (unless the reservoir was EMPTY). Maybe there was a small leak at the front of the master cylinder losing a crop here and there,maybe not, but the warning light would have flickered as the level started getting too low.

Here's where the fluid went...disc brakes have floating pistons, unlike drum brakes whose pistons are returned to the same position by spring tension. As the linings wear, the piston's "off" position moves further out of the caliper's bore. To fill the larger space, more fluid is needed. Where does the fluid come from ? It comes from the reservoir! It is completely normal to see the level drop over the life of the brake pads. And remember, Volvos have disc brakes at all corners so you're drawing fluid out of reserve for two systems.

Forget about the service history, etc. This is a very common symptom with a very simple explanation and it has already been repaired.

As another has mentioned, DOT 4 fluid only. Check with your cracker-jack mechanic to make sure he paid attention to all the labels that said it on the car. Don't believe that "DOT 3 is good enough" or "DOT 5/ Silicone is better". Volvo and ATE prohibit silicone fluids.