Out of curiosity, how did you locate him again the first time? I mean, in this situation he's suppose to be in Lothar's house. I've hard that he occasionally gets trapped in between the walls of neighboring buildings and what have you. So, I would encourage you to scour the area very carefully for him. Otherwise, I'd encourage you to go back to an earlier save before he released Morte and try again.
Obviously, if you have the four disc edition of PS:T, make sure you've installed the official patch. And, regardless of what edition you've got, install
Platter's Fix Pack, as well. The patches sometimes catch annoying bugs.