Molehill, meet the mountain. I understand you are looking at this from an intensely roleplaying sort of way, which I respect. My way of thinking is that he is bad guy. You are Good. The Neutral part of you wouldn't give it up to him because that would upset the balance of power. Either way, time to hack and slash his arse. Besides, Not sure what you need with it, but it makes a cool sword.
Oh, and I don't think Silver swords mean very much in this world, if that is what you are getting at.
Later
BK
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The Black Storm Cloud of the Night
Consort to a Queen
Champion of Truth, Justice and Cloudy's Way
Captain of the Knights of the Golden Dragons
Heart, Mind, and Soul
Offical Wizard and Warrior Questioner
What is this, the Spanish Inquisition?