Is this landlord doing something illegal? Declined after approval

[Christian Wathne]

Hi BP!; this is an interesting question from a different perspective than where I usually sit. I own rental property in Seattle market, but recently moved to the SF Bay area for a few years (W2 reasons) where I am renting. 

I'm wondering if anything illegal happened in this situation...

I  applied for a unit, submitted all the documentation (have excellent credit/income/history/etc). There was some back and forth questions, then a few days later the landlord emailed saying (I added x's to get rid of personal info)...

"I want to thank you for your application and anticipate you will have an enjoyable living experience in your new home.

Attached is the lease agreement for you to review and sign. Please put deposit $2900 to secure the unit within 24 hours. Here is the account information:

xxxxxx

Please mail the signed lease agreement to me at: Once I have received it, I will sign and send you a copy.

xxxxx

If you have any question, please feel free to call me.

Regards,"

I immediately (same day) responded that we were excited to move forward, transferred the funds and printed/mailed the lease agreement back. The landlord acknowledged receiving the funds. Then one week later (yesterday) we get an email from this landlord saying...

"Hi Christian,

I was out of town due to my grandmother passing away. I checked the mailbox last night and I have not received your lease agreement in the mail. I just learnt that one of the owners had reviewed your application and did not want to move forward due to the feedback from your landlord about the frequent loud party. I regret to let you know that I will need to return your deposit to you. Please accept my sincere apology for any inconvenience.

I will send you $2900 check tomorrow at the following address."

I believe the "frequent and loud party" comment is an absolute lie; my current landlord (large company) does not give references over the phone, only fax, and we have never ever had anything remotely close to a party, nor have we ever received any kind of complaint. 

============================

So it was accepted, we paid a deposit, sent a signed lease, then the landlord backed out of the deal for some unknown reason. I don't have any signed lease from this landlord, only the email correspondence. We've of course moved on and will look for another unit; but this was a big inconvenience because it puts us now in a bind and rush. Is this illegal? (in California)