Most of the time a DM's word is law, and simply must be accepted.
If the DMs word is law then I support an orchestrated peoples uprising possibly resulting in regime change.
The DM should only be enforcing laws that the majority of the group agree with (really all the group). Of course during a session a DMs judgement call should be followed for the sake of game flow, but all rulings should be open to debate and criticism at the end or between sessions.
This, however, sounds remarkably like you've got the worst thing possible; a competitive DM. He wants to "win" his game, rather than create a narrative adventure for the players. With the number of people involved I agree with several others. Go out and start your own game.
I completely agree with this though. The DM in this case does not appear to be at all interested in his players (or even PCs), he simply wants to humilate and infuriate them. He is not interested in constructing even remotely fair encounters and wants to powergame the world.
It just isn't fair, even worse in my opinion it just isn't fun. If it isn't fun then what are you doing it for? I am sure you can think of a million activities that arn't fun but result in something worthwhile. (just think you could spend six hours decorating, you might not enjoy it but at least you will have achieved something!)