I can't find an answer that confirms for sure for Californians, but my experience is that if a deposit is required to "hold a spot" for a future "transaction" (in this case, enrolling your grandson in the school), then it is acceptable for a term of the agreement to be that the deposit is non-refundable if the giver does not complete the transaction.
I think you will find that the fact that the spot was filled is inconsequential...I'm sorry to say...
