Stud Fee or Pick of the Litter...or Neither?

My sister in law, came into my home when no one was there to try and get her registered yorkie and my unregistered chihuahua to breed. She had already been looking to see what the puppies would look like, and was wanting to make money. This mother dog had just had puppies and got bred on her first cycle. We did not want our dog bred with hers, however, she did it anyway. She knew that we would get pick of the litter, because we don't care about the money and we would have a puppy from our male. AND, we discussed this on several occasions(no other choice since the deed was already done) However, she and my brother moved and didn't tell us the puppies were born til I asked about them. I have since told her which puppy we wanted, and she and my brother have both informed us that both puppies are sold, and we wouldn't get a stud fee or pick of the litter since our chihuahua doesn't have papers. I call bull crap, that's just my opinion. I told my brother, that doesn't matter, she used our dog to have puppies, bottom line, we want pick of the litter. I told him to get the dog back and give the person their money back, he said there was no way he was doing that, that I was crazy for suggesting such a thing. We were also told by my brother that they would look on the computer and see what it says our stud fee would be and they would give us that amount. I have bred my dog twice, she is 6 years old. (no more puppies for me from her) however, both times (and neither time was either of the dogs registered.)but the owners of the male, the first time, got a stud fee and the second time pick of the litter. Sadly we have just lost our male chihuahua....I don't care if he was full blooded or not (we rescued him), he was one of our babies. I guess i'm just looking for something. I am sickened by the thought that some people are so money hungry and will do anything just to hurt someone. Any advice? My fiance is seriously talking about taking them to small claims court.