What a strange situation.
The only problem I can forsee is the unlikely event that the person with the papers tries to claim ownership at some point in the future. The problem they would have is the bill of sale paper trail. If they signed a bill of sale, that would put a real crimp in their claim. Further, if they never reported the horse stolen, they would have a hard time doing so now - especially if the subsequent owners contacted them.
I don't see why the registry wouldn't help you out in this situation and get you new paperwork (for a fee, of course!) :)