It's well within the rules (or was until recently - it might have changed) for someone who bred both dog and bitch to give them their own affix, even if they haven't bred the litter,This can still be done but
all the pups would have to be transferred into that person's name FIRST, away from the breeder's name. (Did this last year -I was the breeder of the litter that was born here with me but my mentor had bred both parents and asked if I'd mind if we added her kennel name to the pups as well, so these dogs have 2 kennel names both at
front of the names.)
It isn't unusual for somebody to have a bitch on breeding terms and so the breeder wanting pups off her before she is transferred into the other person's name and on such occasions the person who actually has the bitch living with them may well prefer to have the pups born there as well -the bitch is their dog after all, and used to living there. But on those occasions I've known then BOTH people have taken just as much responsibility for the pups, and both have been in contact with the buyers. Bit like on Dragon's Den where you get two investors sharing, you get double the help. :) Or at least that is how it SHOULD be!
As for this poor pup and poor buyer, had it been me I would offer sympathy and a free pup, my conscience would not accept anything less.