The other offer fell through. The listing agent knew that you were interested and when the other party backed out (or couldn't get financing, or whatever the problem was), the listing agent called you to find out if you were still interested.
If you don't take the cash, they will file an eviction notice and you will be evicted. They simply are trying to make things smoother so the house doesn't get torn up in the process.
As to whom the money belongs to (you or the actual owner) I will let someone familiar with Californa laws talk about it.