A question for the
OP. How old was the dog when the mother-in-law acquired it? Was it a puppy, or fully grown, or a couple of years old?
It sounds to me like a past owner took the dog for a drive, then ditched it where it couldn't find it's way home again. Now every time it gets put into a car, and the car stops, it panics because it thinks it's gong to be tossed out again. My parents adopted a dog like that; he gets carsick unless he has his carrier in the back seat.
Oddly enough, he doesn't spend much time in it; he just knows that it is his and since it's there, he's not getting tossed out.

Ah, well. Dog's minds (such as they are) are strange things.
Give me a cat any day.