I don't know what to do... help!

I have had my dog now for 5 years, I found her roaming around my friends apartment complex w/ an embedded collar. She is a Stafford Shire Terrier ( a breed of pit) I never wanted a pit because of the horror stories I'm sure we have all heard. But my dog is the most kind mild tempered dog I have ever had. She's very obedient and smart as a whip! She does great with other dogs, I can open my front door step outside and not have to worry about her running off. When it's time to go outside I open my door tell her back yard and she runs straight for the fence to the backyard she pays no mind to any distractions even the neighborhood strays that tend to roam around. She Is honestly my best friend and the best dog I have ever seen! Well today I went to my grandmother's for our traditional new years day lunch and put my honey in the back yard. When I came back I opened the gate told her "inside" and she bolted to the door. I came in behind her closed the door not 30 mins later I had a knock on my door; it was my new neighbor. He said that his dog (a little chihuahua) got in my backyard while I was gone and my dog had killed it and he just wanted to pick up the body. I was devastated I walked him to the back yard and told him I didn't know where it was, he pointed to a little brown lump in the center of my yard and I helped him box up his dog. I gave him my number and told him if there was anything I could do to let me know. I never have been in this situation and it's so out of character for my dog... I don't know what to do and I'm just so scared that some one will be knocking on my door tomorrow to tell me I have to put my dog down please help me if you know anything about this sort of situation I don't know what to do. My neighbor was not upset, and he told me not to worry about it since his dog was loose and ran into our yard but I can't help but feel terrible. any advice????

Can't you keep your dog inside the house when you go out?

Sadly accidents do happen... What is your dog normally like with other dogs?

A lot of dogs will become protective.... of their own garden.

How secure is your garden/ yard?

Your neighbor is right, its not your fault. His dog was loose and got onto your property. Many dogs are quite territorial. There is no reason why you shouldn't be able to leave your own dog in your own yard. You and your dog did nothing wrong. You did not "allow" this to happen, it just happened. You weren't negligent in any way. I can understand feeling horrified and upset but try to understand that dogs act on natural instinct. Your dog clearly either saw the chihuahua as an intruder or as prey, either is quite likely.

She was a good dog before this happened. She is still a good dog now.

I agree with muttzrules - your dog was contained and "under control", and dogs can act quite differently in their own boundaries.
However, I would suggest taking precautions - for example, keeping your dog in the house when you're out (and popping back for pee breaks or paying someone to pop in if you're going to be gone a while), because as you've found out, accidents can happen and the neighbour could've easily decided to really persue this. A neighbour with a temper may not necessarily give an entirely truthful story but if you weren't around to testify another side of the story then there's not much else to go on. Not sure what the laws are over in your state but it's just not worth the risk that someone could demand your dog be euthanised for something like this.
Also, your own dog's safety is important - dog thieves seem to be more and more on the rise nowadays and theft for ransom isn't so uncommon. Even theft/murder of an animal just for kicks isn't as rare as you'd think - someone with a grudge or just twisted in the head may try to steal the dog to torture it, or if they can't access the garden, may throw poisoned food in. Some sicko in the town along from me was going around killing people's loose cats just for the fun of it and apparently killed a straying dog he found too.

I think you have a sensible neighbour, be thankful. Your dog is not going to welcome any intruder into her own place, and this was a sad but understandable response.
I would buy your neighbour a plant in memory of his little dog, and try to reinforce your fence.

Perhaps you could put up a dog run within your yard so your dog could still run around but there wouldn't be any risk if another dog (or child) managed to get in your yard? Would be more secure that way too?

Thank you all for your comments and advice. today I was able to speak with our vet about the situation. He's been Honey's vet since I found her and his daughter owns the training facility where I took her for socialization classes before I took her home since our roommates at the time had 3 dogs and 2 cats. He reassured me that Honey was fine and that this wasn't a sign of aggression, unlike humans dogs don't have morals so even though I think this is a terrible thing my dog was just following her natural instincts. Also since the chihuahua wasn't mangled or bloody it was most likely either an accident or nip that broke the little guys neck. When I helped my neighbor pick him up he looked like he was sleeping, there weren't even any bite marks. Needless to say our vet put my mind at ease as far as my concerns of her becoming aggressive or having to be put down. He gave me a crash course in the Tx bite laws and reassured me that even if my neighbor did decide to retaliate by ordering my dog to be euthanized for aggressive behavior he said he would vouch for her with no hesitation. I also talked with my husband and told him to make sure she's only outside when one of us are there/ awake, (he works graveyard shift) just to be on the safe side. We're even putting up "Beware of Dog" signs on our fence which we both got a good laugh about since our Honey is a total push over, lol.
@GSDlover4ever; I normally do keep my dog inside when I'm not there, my husband was at home at the time when I left but he fell asleep (he works graveyard) before I got home. My fence is practically impenetrable, the chihuahua dug a tiny hole and squeezed on through. My dog has always gotten along w/ other animals wether it is a cat or dog; she has all sorts of doggie friends from Peanut, a rat terrier. To Brock, a Great Pyrenees. She doesn't even chase squirrels in our yard hence my shock when this happened.
@muttzrule, thank you so much for your comment, I think I just needed to hear that my dog was still a good dog. When this happened it's like part of that innocence that I always saw in her kinda dissipated. I could always say, "My Honey couldn't hurt a fly" and after this i can't say that any more but you and Dr. Tremier have really helped me to understand that my dog is just a dog and she's just reacting the only way she knows how. Thank you.
@krlyr; great advice, as I said before normally she is inside when we're gone. My husband does tend to put her outside to play when he's about to go to sleep and I bring her back inside when I get out of work @ 2pm. We never really thought anything of it since it wasn't an everyday thing but as I learned it only takes one day :/
@ ClaireandDaisy, love the plant idea, I was thinking of offering to buy him a new dog when they were ready for a new one, but a plant is a much better (and cheaper :P) idea.
@wallaroo; that would be an idea but we're renting the house so I don't know if the landlord would approve of a dog run. The yard is huge so I don't think it would be a big deal it's a good thing to ask about. I don't have to worry about children we have three of our own and she has learned from the day our son was born that she has to lay down when there are babies around. I was surprised she caught on so quick, she has a tail of fury so that was a necessity. Every time the baby was in free roam mode if he got close to her or vise versa we'd just tell her sit and lay down and eventually she just did it automatically when ever a baaby or child entered the room. plus our fence is a 6ft privacy fence with a lock on the gate. The only things I've seen get back there are squirrels and birds.... and now one crazy chihuahua.

I am glad to hear you are feeling more positive now.

Your dog sounds very well behaved and well socialised.

I as wondering if the little dog possibly had a heart attack through stress or exertion.

Yea that's what I was wondering too... I'm not sure but I'm glad my pooch isn't on death row lol

ermm a sbt is not a 'kind of pit'