The title of the thread asks us to share our stories, so I won't get into arguing over whether the OP's GM is a rat-bastard or just a jerk.
Based on Hypersmurf's definition: "The Rat Bastard DM may do horrible things to your characters - or more likely, set up situations where you do horrible things to them yourselves - but in such a way that you end up loving the experience."
So here's my Rat Bastard GM story:
Our group ran a campaign in which the PCs were all magic-using mercenaries. We were hired by a master swordsmith to gather 'ingredients' for his magnum opus, a runesword. In the process we learned that a group of god-like beings known as Reavers were making their reappearance in the world after a millenium-long absence. The Reavers were battling against the gods (who were actually another faction of Reavers, we discovered) and their fight threatened to destroy the world, or at least wipe out or enslave all the sentient beings in it.
Our merc company began trying to recruit other mercs and other races to stand against the Reavers and tell them to get out of our world. But we had to keep working for the swordsmith while we were at it, as the result of a poorly written (for us) contract. As a part of this contract we had to recruit a master swordsman to work for the smith. This swordsman and my character made a connection, which might have become romantic if my character hadn't been serving as an avatar of the sun god at the time.
At last we reached the denouement of that part of the saga - the forging of the runesword. We had already determined that our employer was amoral and had no interest in serving one side or the other in the Reaver conflict. We decided to do what we could to control the ingredients going into the sword to turn it to good, hoping that it could be used as a weapon for our cause in the conflict. We all gathered at an ancient long-abandoned dwarven forge to witness the forging of the sword. We already knew that one of the smith's ancestors had been so obsessed with forging his own runesword that he'd become a lich and was sacrificing people for their blood, but what happened next still came as a horrible surprise.
As he completed the sword, the smith turned to the swordmaster standing beside him - and plunged the white-hot blade right through the man.
Naturally this was rather upsetting to all of our PCs, especially mine. But it got worse. The sword was now sentient and hovering in the air. It threatened anyone who approached it - except my character. She'd just watched a man she might have grown to love die by this blade, and now she was the only one who could wield it.
Rat-bastard GM? Definitely. I'll never forget that moment.
Now the same GM is running another campaign that borrows some concepts from his previous one. He'd better be careful, though - his wife is running the PC who most closely resembles my old character. If he does something like that to her he'd better expect to be sleeping on the couch.