How does that go along with the idea that the paper is the first student's property, and therefore their own to destroy or not destroy? Personally I think the third student also did a wrong thing by destroying someone else's property. In the situation where the paper had not yet been destroyed, I'd have encouraged the first student to erase the writing (if they could), destroy the paper themselves, or tear it out of the book and give it to the third student to dispose of. In the end, though, it's their property and their decision.

(And xiphias, I think you did good.)