I think it was unethical to do it like that, yeah. And you're right I don't know the history between the two of them, so I can't say which was the asshole. But I do think I'd have been an asshole had I stayed after learning that.
I've written/read the word asshole so many times, I'm reminded of Spaceballs!
But you're right, I didn't know them enough to judge who was in the wrong. I think that was the problem. If he'd just fired the guy without telling me, I'd have been surprised but there wouldn't be anything I could do. Instead, he effectively gave me a choice: stay and someone you barely know loses their job, or leave.