Sorry if this is long...
1. You massaged all over his body and found no soreness!!! Correct... personally if the horse was in pain then he would have showed it with you touching him slightly. But some are more comfortable with hiding pain, which leads me to ask were you pushing into his muscles to get enough pressure to show a reaction?? And did you do it all over his body not just his back?
2. The horse could be scared of the new surroundings. Maybe he was jumped place to place to fast and is nervous with who is alpha or who is his herd. He might think he is alone.
3. In all honesty if the owner doesn't want to put in the money or time and you can't afford to take him yourself slaughter might not be bad for him. I hate to say it. But he doesn't sound like a mean horse just sounds like a scared one. I would say try an convince the owner to sell him to an experienced person or to a rescue to work on his behavior. I just think he has alot of issues right now and its more than you and your hubby can face together. He needs one on one right now to regain his confidence and trust. And it takes time and money to help a horse regain both.
Sorry if ii wasnt any help. I wish you guys luck