It’s pretty simple, actually…
His stuff belongs to him.
Work you did belongs to you unless he pays you for it.
From now on, with all untested clients, 50% of projected costs up front.
As far as the law is concerned, your client asked you to do work and you did it (that’s a verbal contract). Most states in the nation would require your client to pay, regardless of whether or not he likes the results…however, if there’s a dispute, most courts expect the client to give you an opportunity to “remedy” the problem.(s). If you can’t remedy the issues, that’s another story.
You are completely within your rights to do what you want to with the work you performed…delete it, archive it, whatever. You need to weigh the karma hit on your own ;).
What we generally do in these situations is see if it’s possible to address the client’s concerns. If that isn’t practical, I like to ask the client…”what would you do if you were me?”. More often than not, that starts a meaningful dialogue.
Hope this helps!
Ian