First, I'd be firm. I'd say "Once you've made your case and I've ruled, it's over. Period." I'd also insist that he either engage the adventure in a reasonable way or role up a more appropriate PC.
Secondly, here's kind of a weird observation. When I used to game a lot with people who were deep friends, it was actually harder to make stuff like this work.
These days, I have really good pals who I play D&D/Pathfinder with, but we really only get together for the hobby. That's our connection.
It just makes it a lot easier. If this situation (OP)arose in my group I can just say to a player, "Look, what you're doing is making it unfun for me, so change up."
And they'll know that it has nothing to do with anything other than the game. Obviously, it's manageable when people have other connections, but it's more complicated.
But I would do your best to make sure that you know what's actually going on. Is it a gaming thing? Is it a something else thing? Is it maybe possible that the truth is that he doesn't really want to game anymore?
One other thing the OP highlights is the need to constantly constantly be recruiting and building your player pool. I live in a really small rural town in the middle of nowhere and we have between 5 and 8 players at our weekly games.
If someone started mucking up our games and was being a jerk and I couldn't fix it, I'd be able to disinvite them in a heartbeat and the game would go on.
And a final thought, slightly (but not completely) off topic.
In my games (the ones I GM) I've completely banned "bad" PC behavior toward the rest of the party. I don't care what your alignment is. I don't care how you describe your backstory.
I've just seen too many otherwise good games unravel when a player gets it into his head that in order to be true to his PC's nature he has to muck up the adventure or attack other PCs or whatever.
That stuff's no fun. And it doesn't just wreck adventures, it can wreck whole gaming groups.