Pooka, please bear in mind when I write this that I am a grudge bearer too. I am not setting myself up to be better than you, I am just channelling other people who have advised me over the years.
You have lied to her too. If not in exact words then at least by omission and behaviour. I can understand why you are angry - this is something that you now feel personally about. But in truth, you offered her this fabric and when you saw it had been used you did not immediately address the situation. I know you believe it wasn't used until after you asked for it back, but I will just ask that you consider this: did your MIL, knowing you wanted this back to make a quilt for your children, deliberately use the fabric and lie about it? Does she bear a grudge against you? It's a spiteful act if done in full knowledge.
Of course this might be the case. Flint certainly has not defended his mother. And I think I remember him saying he would not trust your baby (the first at the time) with either set of Grandparents and would rather put them in a creche at the gym.
I have no solution to offer you except that the best option is absolute honesty. She may actually know you saw the quilt and be saying the same about your duplicity to her circle.
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