yep, totally missed that!
In that case, OP & Wife should absolutely go and to not go will be perceived by everyone else, FIL included, as them being petty.
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Well, I’m sorry your family is going through this. Family rifts are the pits. But… my immediate thought in reading this was that I couldn’t see what the big deal was with having the dog in the house where it lives. People have pets and it appears the dog did nothing wrong.
My other thought is “what a shame this family is torn apart because of a dog.” And I’d like to add, I am not a dog person. I love cats and put them away when we have people over, but your SIL’s house, her rules. Personally, I would LOVE it if everyone put their dogs away when they have guests, but I prefer my friends to their dogs and so I deal with it.
I have to say, it doesn’t seem that you are right. If the dog had been destructive, aggressive, or otherwise terribly behaved, maybe it would seem you were justified. It seems your wife really couldn’t handle the thought of having the dog present. In all honestly, I think this is your wife’s issue to tackle. So many people have dogs, and if she is phobic, she needs to do something about it. Not the dog owners.
My opinion, your wife needs to apologize and address her fears. I’d encourage her to do that, in your shoes. Parting ways with the family over this is just not worth it.
Edit: I believe the wife needs to seek the help of a mental health professional to overcome her phobia. Notice that at no point do I say she has to “get over it” as has been stated in the next post.
This is so insensitive to say. You simply don’t understand that phobias is not something easy “to get over.”
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She has to address it. I’m aware people just don’t get over it. She should seek the help of a mental health professional. I will rephrase.
And I did NOT say she has to get over it. At all.
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I don’t think she owes an apology to the BIL or her sister. They refused to accommodate her medical condition. What if it was a physical problem they wouldn’t accommodate?
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I agree, FIL just wants time with his family, rather than taking sides.
As a friend states, “Fair is where you show a pig.” You can be in the right, and have been treated unfairly treated, walked on, etc. All acknowledged. Some folks just take up most of the air in the room or the sense of privilege in a family. Knowing how to set boundaries is important. You set that boundary with leaving when the dog entered the house and therefore the next gathering is being planned sans dog in a restaurant. That is a victory, even if it doesn’t feel like it right now.
You may be at a fork in the road here. You are all trying to plan a get together now to celebrate FIL. If you and wife refuse to attend this time, or if you do attend, however begrudgingly and uncomfortably, what will happen with the next gathering? Will you be invited? How will that feel? Do you think SIL will apologize? My bet is that it is not in her wheelhouse, but you may know differently.
I used to think my family of origin was quirky but sweet. That changed with my mom aging, and disagreements became estrangement, an increasingly sad situation. You don’t have to be best friends but the ability to be in the same room for FIL while he is alive is a precious gift to him. And perhaps the rest of you.
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You don’t like my opinion. I’m sorry. But I absolutely did NOT say she has to “get over it.” I said very clearly she needs to address it, which is a very different thing.
She does need to address it if she ever wants to spend time harmoniously with her family. It is not worth losing a family over when she can take steps to address it. Phobias can be treated.
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What is easier: spend $$$ and time on the treatment of a condition that otherwise doesn’t affect that person’s daily life or remove the dog from the room? If our visitor with allergies requests we get the cats away from them, we lock the cats instead of bringing out a bottle of Claritin or another allergy medication (we have plenty). We definitely don’t tell the visitors to suck it up or leave.
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The wife will have to deal with the issue in some way. Many people have dogs. Th OP states it’s been getting worse. This is something that can be addressed, and it’s worth paying for.
I am 100% certain that you are not implying that mental health treatment isn’t worth paying for, just as I was clearly NOT saying that this is a minor thing that people just have to get over.
We can take this to messages if you’d like to continue. But let’s stay on topic.
This isn’t addressing the OP’s dilemma but addressing another point.
And this is why I love CC so much and why it is personally so beneficial to me. Where else are we able to be our own advice columnists. I am so fond of all of you 
I have plenty of relatives who are flaky as crap. Don’t follow up, don’t respond in a timely manner. Are frankly very difficult to deal with.
I used to think that they didn’t respect me as a person to do the things that come naturally to me. Like tell me when they were showing up. Or calling back when it was important that I need to hear from them.
I decided that they all have ADHD, executive functioning disorder. That it wasn’t personal but this is who they are. I now decide to take power into my own hands. And take it away from how I felt when they don’t follow up.
It’s also nice that my flaky as heck sil decided to divorce my bil and I don’t have to put up with her anymore 
Back to the OP.
She may need to address her phobia. But as many people are, she has coped by avoiding the thing that causes her anxiety. Lots of people do this. But that’s only a symptom of the issue and it’s moved way past that now.
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Another comment. If you and your wife agree to go to the FIL bday dinner with SIL and her husband, you and your wife (we can’t control the SIL and H) have to agree that you will work really hard to be cordial and maybe even make a list of some safe conversation topics so its a pleasant night for FIL and it doesn’t turn into a disaster.
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I’m terrified of heights. I simply avoid going to places I know would make me miserable. I don’t feel the need to address this in any other way.
We had a neighbor who was terrified of dogs. Yet she managed just fine to live between two families with dogs. She just couldn’t have a dog approach her within several feet. Dogs roaming in our fully fenced backyards bordering her yard were fine by her.
Every medical issue is a cost-benefit analysis. Does it need treatment or will avoiding the trigger help?
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It will help. But it needs to be addressed, as I said many times, because it has destroyed a family.
Mental health issues need to be addressed. And I’ve had mental health treatment. I’m proud of it.
Now, let’s go to private messages or stop this conversation please.
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Yes, please take it to PM!
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Cats are not dogs, heck cats can be left alone with food, water and litter. Granted, I’m not a cat person (very highly allergic) although I do try (because I’m an animal person, we had pet rats which surprise I’m just as allergic to at cats). The only dogs I’ve ever known to be shut away were somewhat dangerous (like Max, my high school friend’s German Shepard who ended up biting a chunk off of her sister’s face, the dog was kept, which is insane). In this situation just have family gatherings elsewhere.
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Your wife is on the losing end of this disagreement.
Your FIL & SIL and families will all be together to celebrate FILs birthday. Your FIL, rightly so, did not take a stance;, and why should he? He loves his family and doesn’t want to pick a side. It sounds as if your SIL kept her word and the dog was outside pre-lunch. Your BIL could probably have handled it better (sounds as if he may have been a bit aggressive in his tone), however, your SIL was true to her word and the dog was outside, at least in the beginning.
The birthday celebration is in a restaurant where the dog will not be present. I think your wife needs to move on from her grievance and celebrate her father, who wants all of his family at the same table. At the end of the day, your wife will be the biggest loser if she doesn’t get over her grievances, which appear to be something larger than a dog in the vicinity of the dining table - the family will still be a family - SIL, BIL, FIL - and then there’s your wife.
Time to grow up.
ETA - I don’t think this is about the dog - this is about two sisters who have hit a rocky patch.
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Well-trained dogs can be put away for a couple of hours while humans are eating. 
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As I see it, the dog is not the main issue, it’s years of hard feelings being built up and that was the last straw. Your wife’s life is short too and it will not kill her father if she has a private celebration with him without her sister’s family’s presence. You can choose your friends but cannot choose your family so I’m OK with your wife not seeing them at all.
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But also, it wasn’t just that they wouldn’t put the dog up for a couple of hours. the sister said she WOULD put the dog up when they were making plans, and then once there, reneged on the agreement - again knowing about her phobia. If they had said sorry before they went, they could have made other plans where to have the party. That is a big difference and I think the main sticking point - plus years of issues…
And for all we know, dear old Dad could have 50 years of siding with the other sister and she’s just tired of it. So I just don’t think it’s quite as cut and dry as some seem to think - though it would be nice and being the better person to go to the dinner.
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Even trainable dogs with good trainers can have issues! We have a failed service dog who made it through three months of professional training. She is technically very well trained, but if we put her away from us while we are home, she will bark and cry the entire time. With that said, I accommodate any guest who prefers not to be around dogs by sending her to the neighbors house, or having the kids take her out.
Anyway, if I were the OP, I would encourage my spouse to reach out to her sister and just say, “I miss you. Can we please work this out?” Why let pride and being right rob you of having and being a sister?
If the situation involves addiction, abuse, personality disorder, or threats from the sister, I totally understand that reconciliation may not be possible or safe. My spouse has one of those severe situations with siblings. It is heartbreaking, but he can not have a relationship with them. This year, we established that when his mom has an important celebration, our family does something special with her separately, just us. Thankfully, his mom agrees and has supported this plan.
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