Legal Question in Construction Law in California

I would suggest trying to negotiate the problems, particularly if the money involved either way is pretty large, i.e. this would not be a Small Claims suit. You also might try mediation or binding arbitration.

Generally speaking, when the owner says he isn't going to make the final payment when it comes due, and there is no real justification for such an announcement, this is an "anticipatory breach" and the contractor is relieved of his duty to continue performing under the contract. So, on the face of it, I'd say you would prevail. However, since you didn't finish the job, you'd be entitled only to what you were owed for what you did, including profit, and not the full contract price.

The law of anticipatory breach tries very hard to figure out, through all the finger-pointing and counter-accusations, who's really to blame for the breakdown of the deal, and to award fair damages. I'd have to hear the arguments of both parties in order to guess who'll prevail.