I'd be furious too. But did you tell her when you gave it to her that it was handmade, how much time and effort went into it? All that stuff? I've learned that people who don't sew or visit fabric stores don't have a clue how much money and time is involved in a quilt. I'd also tell her how much time and money you spent on it. It would be different if it was an inside dog who kept stealing it off the bed.
I made a quilt for my brother and later found it in his trunk of the car under his tools. It was greasy and torn, looked like a grease rag. 'What is this doing here?" "Oh, I wanted to protect my tools." "Really? You use a quilt that I spend $200 on fabric alone, and 4months of work because I thought I loved you to absorb oil? Our Aunt quilted it, for you because you are family. she charged other people several hundred dollars to quilt something this big. She's dead, you won't be getting anything from her anymore. I told you that she quilted it before she died." I stomped off in a huff and that was the end of gift exchanges in my family.
I don't care how much the gift giver should release the gift and not expect anything from it and the receiver should be able to do what ever they want-they'll never get another quilt from me or anything of value. It's a slap in the face when people don't value something that you've spend so much time, effort and money on something you've made special for them.
That's why I don't make quilts for anyone. I'd rather give to charity, that way I don't see what the person is doing with the finished product. And I hope that some child is getting a little comfort from what I make.