I am not a lawyer, but AFAIK the lawyer is correct. In spite of the money paid, no legal transfer has taken place. The same thing could happen with a car, furniture, or any other item you buy and have to wait for delivery for one reason or another. The situation where a gun (or car, etc.) is in the shop for repair is not much different if the shop goes out of business or burns down, even though there is no question of ownership in that case.
FWIW, I doubt that BATFE will take any position on such a matter; they will say they approve transfers and that the rest is a civil matter for state law and a state court.