Apparently the logic behind that decision included the argument that the fact that they posted a "beware of dog" sign indicated that they knew the dog was dangerous (duh, that's sort of the point) and therefore shouldn't be given further chances.
Yes, I realize that this wholly ignores the fact that the would-be thief was trespassing and that the meanness of junkyard dogs is so well-known as to be mentioned in a popular song. And that, again, the risk of getting bitten by the guard dog is precisely the deterrent factor in the system.