Being that this is the DM doing it, I'd say he's well within his rights. He could have made up an entirely new spell that does this, or used the other spell already printed. Heck, he could have had a high level Mystic Theurge ally cast it on him. He could also handwave it away. The question is more a case of: "Did you still have fun?" Having a foe get fully healed in the middle of combat, thus extending the combat, sounds like it would have made things tense and awesome. But then, that's me. For a BBEG, I wouldn't bat an eye on seeing this sort of thing.
The other issue here is, however, having two contingencies up at once. Can a contingency spell be in place at the same time as the psuedo-contingency spell? If not by the RAW, it's apparently an unannounced house rule, and you should call the DM on it. Not in terms of "you can't do this anymore" but in terms of "we should be able to do this too". So start double contingencing yourself right away.