Legal Question in Real Estate Law in California

I'd say there is a strong possibility that John and Jane have a legally-enforceable oral rental agreement, and that the brief note given in your question is not the agreement, but is evidence of the oral agreement, which could be admitted in small-claims court as evidence of the existence and terms of the oral agreement. The supposed "illegality" of the subletting is not particularly important here; it is at most a breach of Jane's lease agreement with the landlord, and the landlord is the only one with a right to complain or sue on that. Whether John/Jon is entitled to a refund of his security deposit, and how much, will depend upon what claims Jane has against him, and whether the claims are of a kind where the (sub)landlord is allowed to deduct from the (sub)tenant's deposit. Such claims may include damage done, cleaning, and a limited amount of unpaid rent. A security deposit is not intended to give the (sub)landlord a windfall; it is there for reimbursement of actual losses occurring upon the (sub)tenant's default.

I'd say you should be doing your own homework.