Pete,
If it makes you feel any better, I had something similar happen to me when I wore a younger mans shoes... I had purchased a rolling chassis '64 El Camino from a relatives friend. It sat in his yard for a number of years and he had never titled it. Shortly after purchase, I dropped it off at a paint shop, along with a deposit. A couple months go by... I swing by the paint shop and its gone... vanished... the car, the paint shop, and the owner.
By the time I figured out what happened, and where the car went, it had found a home at a private lot. This person decided that the car was far more 'his' than mine and filed for lost title. I spoke to him and his wife on the phone a number of times over the course of a week... he refused to negotiate. To this day, I have never met a more self-centered person.
Because I had not yet titled the car in my name, I never received the DMV's notification. And, because I can't prove that the painter never intended to paint the car, I can't prove that he stole it.
My negligence cost me around $4000 and a fair amount of grief. You can bet I wont do THAT again.
I never found the painter. Through lots of legwork, I discovered that I wasn't the only one looking for him. His name was Corbin May... if any of you know of him, I should like to 'thank him'.
Though it doesn't sound promising, I hope it works out better for you.