I don't want to sound all abrasive or anything but first:
I highly doubt a tom cat, no matter the size, would just sit there and be murdered. I've seen a feral kitten in action fighting against being captured by a rescue worker (who gave up after several scratches and bites)
I have a cat, and I adore him! I would be beyond grief if he got out and wound up dead in the next door neighbors yard.
Attachment 339891 now he is a little chubby (he's been on a diet since I adopted him) and he's down to 13.5 lbs. Rizzo, my yorkie (5lbs) likes to "attack" Fatso on occasion. So I can picture your yorkie "prowling" and closing in on his "prey". For the most part Fatso takes whatever Rizzo throws at him, only because he's just playing, but when he's tired of it he jumps where Rizzo can't follow, or bites/smacks him (no damage yet).
So I just want to mention that overweight cats are not only fast, but pretty agile too. I have seen him squeeze through small spaces, and hop clean over a 4ft fence.
I try not to take anything personal here, but the comments "fair game" and well this whole comment:
Originally Posted by T-Rox http://www.yorkietalk.com/forums/ima...s/viewpost.gif 
I don't know if its inappropriate to notice since it's such an awful situation with a cat being dead and all but isn't it funny how most of all of us are like "is the pup ok?" or "Your yard, fair game", and my favorite so far " maybe a bird of prey could have killed it with it's talons" haha! I'm guessing none of us are cat people :P. Anyway I'm glad your baby is ok, cats can be super mean. That is my greatest fear with my Roxy is that another animal is going to harm her because she doesn't really attack but she gets REALLY excited and curious with other creatures (of all sizes) and NEEDS to run up and say hi. Did you tell the neighbors??
was pretty offensive. It's not a funny situation when an someones pet dies, regardless of species.
Sometimes Fatso runs out the door in the morning and climbs beyond reach and if I'm running late for work I sometimes have to leave him. He is a big boy and doesn't leave the yard (I doubt he could clear the 8 foot fence) He sure gives me a mouthful when I return though, just sits right next to my drivers side door until I open it, and that's when the meowing starts.
I would certainly hope that if Fatso was possibly killed by a neighbors dog, they wouldn't be off telling their friends well he was "fair game"
and laughing about the possibility that maybe a bird of prey got to him first, and left him in such a state that he couldn't defend himself from a 10lb dog.
I'm happy the OPs yorkie wasn't harmed, but I feel for the family of the now dead cat. They really should have kept him indoors, but sometimes cats can be just a quick as yorkies when they escape. But I'm sure the family is thinking about this now, all the "what ifs..." etc.