Ridgley v. Topa Thrift & Loan Association

Robert and Marlene Ridgley (plaintiffs) took out a construction loan from Topa Thrift & Loan Association (defendant), payable monthly over two years. Topa's standard form charged six months' interest as a prepayment penalty, but after Robert objected, Topa revised it so the prepayment charge would apply only if the Ridgleys had made any late payments. The Ridgleys did pay late several times, but Topa simply adjusted the schedule without charging late fees. When the Ridgleys sold the house and paid off the loan early, Topa collected the prepayment charge because of their earlier late payments. The Ridgleys sued to get it back; the trial court ruled the charge was an improper penalty for lateness, but the appellate court reversed in Topa's favor.