Peggy Ranger, the owner of a 6-year-old Shih Tzu named Stanley, dropped the dog off at Montreal Dogs on Feb. 7 for care during the day.
In the afternoon, Ranger got a phone call from the kennel saying Stanley had escaped, the newspaper said.
Ranger mustered family and friends and began searching for the 14-inch-long dog and plastered the neighborhood with posters.
The co-owners of the kennel, brother and sister Cesare and Mina Carbone helped search along with their staff.
Monday, soon after an animal rescue group announced it was bringing in tracking dogs and had secured security video from a business across the street from the kennel, the Carbones called Ranger to tell the truth.
Stanley had been left alone with a group of larger dogs who had attacked it and nearly decapitated it, the Gazette said.
Cesare Carbone said he and his sister had panicked and lied because they thought it would be kinder to Ranger, the newspaper reported.
"In retrospect, it would have been best to tell the truth," he said.
Ranger is considering a lawsuit, the newspaper said.