>Enemy Wizard downs our Paladin
>Threatens to kill Paladin unless our Wizard give up his ultra rare robes
>Wizard and no other player cannot do anything to prevent death of paladin or prevent death of paladin without giving up robes
>Paladin would be back up next turn with a healing word if fight went on normally
>Wizard gives up robes
>Enemy Wizard leaves

I feel like our DM just did that because he didn't want our Wizard to have a nice item or he hates our Paladin and wanted him to die. Should DM's take items away from players when not everybody is dead?