Is it appropriate to reject a manuscript based on language (minor) issues after first review?
It is hard to see how ethics enters in to it. Had you paid them something and they rejected it, keeping your money, then it is a different matter. But a submission is just an offer and it can be rejected for any reason. It may not represent the best policy in general, but it isn't unethical.
And, perhaps there are other issues as well and they all piled up to indicate a reject. That is impossible to judge without more information that only you and the editor might possess. It might be as simple as not wanting to do a third round.