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I agree, there could be some legal ramifications. Granted, what those ramifications are depends a lot on the government in the area.
Paladins are known for being good and just, so in a good society, it is likely that his actions would be viewed in the best possible light. This does not excuse him from wrongdoing, but it will sway a he said/she said situation. Which is kind of what the current situation is. The paladin can say, "she was about to cast a spell, I had to act quickly and decisively for the good of my comrades and the innocent children who may have been harmed", and unless the party turns against him, the authorities will likely take him at his word. There might be some skepticism, but once it comes to light that this woman was kidnapping children and ransoming them back to their families, the reaction from the authorities may very well become "thanks for taking care of that for us!". Perhaps a few jaded guards are sick of those adventurers walking around like they own the place, but he would be by-and-large in the clear.
This is assuming the standard behavior that I generally see from guards in my campaigns. Depending on the town, the legal ramifications could change drastically. If they are mistrust paladins, don't recognize the paladin's deity, are extremely strict about "no killing" even when doing good, or are corrupt, the reaction would definitely change drastically. But in generic good village #53, flashing his paladin credentials, revealing what she was doing, and saying "she refused to surrender and may have been casting a spell that would harm innocents. I did what Torag would expect of me", would probably alleviate most of the legal concerns.