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Ridgley v. Topa Thrift & Loan Association

California Supreme Court
953 P.2d 484 (1998)


Robert Ridgley (plaintiff) was an architect and developer who bought a piece of land with his wife, Marlene Ridgley (plaintiff). The Ridgleys built a luxury house on the land. To pay off their construction debts, the Ridgleys got a loan from Topa Thrift & Loan Association (Topa) (defendant). The loan called for monthly payments over a two-year period. Topa’s standard form stated that if the borrowers paid off the loan before its due date, then the borrowers would have to pay six months’ worth of interest as well. Robert Ridgley objected to this prepayment charge, and Topa changed the language to say that as long as the Ridgleys did not make late payments, the prepayment charge would not apply. The Ridgleys made a number of payments late. When this occurred, Topa adjusted the payment schedule and did not charge the Ridgleys late fees. Ultimately, the Ridgleys sold the house and paid off the loan several months early, also paying the prepayment charge. Afterward, the Ridgleys sued Topa to get back the prepayment fee. The trial court ruled in favor of the Ridgleys, holding that the prepayment charge was an impermissible penalty for making late payments. The appellate court reversed, ruling for Topa. The Ridgleys appealed.

Rule of Law


Holding and Reasoning (Werdegar, J.)

Dissent (Mosk, J.)

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