I'm getting sued by a customer who did not pay.

Not sure what your question is, but whether you get to just "walk away" or not is not up to you; if the woman sues you, you will have to defend the suit.  Based on the facts as you've presented them, you should win, but with no documentation, it may wind up being her word against yours. Incidentally, you say you had no contract.  You had at least two.  The first contract was to sand the woman's floors for an agreed sum of money.  The second contract (or it could be considered a modification of the first) was to settle the dispute you had with your customer who thought  you didn't do a good job - you agreed to give up your claim to be paid for your sanding work in exchange for her agreeing to give up her claims based on your allegedly incompetent services.  Assuming the Court believes that you entered into such a settlement agreement, your customer appears to have no basis to rescind it, and you should win your case.