Most of the people I know that are contractors, are independent contractors. The smarter ones incorporate or at least get liability insurance.
As stated before, you are looking at the first part of construction, have it ripped up and done over!
If you go to Small Claims Court and explain to a judge that this work was not performed properly, I am quite certain that you would win a judgement and it would be up to the contractor to abide by the court.
But, we may have overlooked the posability that after the stop payment, the contractor might want to make it right.
Grinding would not be an option for me.
Ps. I would re-think the "friend" recomendations in the future.
Get referals and look at some of the jobs they have done in the past. Talk to the owners to make sure they did the work and what they thought of them. (I knew a guy that would tell people to ride by and look at houses that he never did.)