If you have already spent money advertising the site and are really getting traffic to it, it may very well be worth more than a measly $40. The design on the page probably isn't really worth too much, but now the time you spent adding all of the content can start adding up. Anyhow, if you can't spend $40 to get him to go away, maybe you should reconsider becoming a webhost?
If you already have customers then this should be a no brainer, give him $40 and he goes away. My guess would be that if you do infact already have the site advertised and already have customers then it's easily worth more than $40.
Just my 2 cents...
P.S. If you are argueing over $40, it's probably a good thing that you are no longer going to be partners!