My parents have a dog who likes to escape and run around the neighborhod too, and you know what? She is NEVER allowed outdoors unattended (Or offlead for that matter), because the backyard fence does not prevent her from getting into the neighbor's yards. It is simply being a responsible pet owner.

I am sorry for your loss, but if he had already complained to the police about the dog being on his property you had plenty of warning. No doubt he could have handled the situation without killing the dog, but I still think the fault lies with the owners who knowingly allowed the dog to run loose.