What would you do if your neighbor exhausted pellet stove into a pipe that blew smoke at your house?

In line with a previous answer, I believe you can ask your neighbor to extend the venting upward so that it is at point where the exhaust travels upward over the house and not onto your house. This may look odd, as a pipe will be attached to his home's exterior traveling upward. And it will be at a cost to him. But, I also believe there must be some local laws which will require him to do so if it causes damage or if it presents any safety concerns regarding you and/or your home. I'd check into the local building codes and laws and then discuss this with your neighbor.