California was the name of an imaginary country in the Romance, "Las sergas de Esplandian" by Spanish author Garci Ordonez de Montalvo, written in 1510.

Spanish explorers were familiar with this work and applied the name to part of the New World (presumably to Baja California first).

Where Montalvo got the name is unknown, but there is no known connection with the Arabic word "Caliphate".

http://www.etymonline.com/index.php?allowed_in_frame=0&search=California&searchmode=none