How does this happen? Transferring a child to a non-related person other than thru the child protective services.
This is what happens when you play mommy and daddy. At the time I bet the birth mother thought they were hip and cool. Now it sounds like she might be a fugitive and will loose all rights to see her child if caught.
The very short story leaves out some very relevant facts. For instance, does VT law allow for same-sex adoption? It probably does, which begs the question, did this "spousal partner" legally adopt her non-biological child? If she did, she's in a VERY strong legal position, a position that would likely be upheld on appeal. If she didn't, she still may have a strong position giving the VT homosexual marriage laws. I'm not familiar with VT, and I don't even know if such laws exist in VT.
But, to answer your specific question, even child protective services can't "transfer custody". That can only be done with a judge, utilizing the principles of due process. In all the states that I'm familiar, CPS may only temporarily remove a child from a parent's custody, FWIW.