Time to get rid of the mother-in-law. It's one less mouth to feed.

Your MIL is crazy. She had no right, absolutely none, to give away your dog. Apart from how morally wrong this is, she had committed theft. Also, what kind of person would do something like that?! She completly dicarded your feeling/opinion on that."One less mouth to feed", who asked her opinion, is she paying anything? Same with the mail "I thought it was junk mail" seriously, she can't make the difference between junk mail and serious mail? Have a talk with your wife, because mother or not, her mother/your MIL is going to ruin your life if nothing is done. Tell her to mind her damn business but honestly I think she kind of forgot that she is living in YOUR house, on YOUR money, not the other way around. You need to sit her down and have a talk with her. Either that or she is doing this purposely because she is trying to "assert" dominance (I can't find a better way to say it, she basically does not like the fact she is relying on you and your wife, so she is trying to have a bit of control over you by being a jerk). I hope you got your dog back (again, no matter who she gave it too, she had no right to do that, so it was theft, whoever she gave it to can't keep it, that's the law)