FIRST DIVISION

							September 30, 2002

No. 1-01-2856

ANTHONY JONES and MARCELLA JONES,   

	Plaintiffs-Appellants,			

	v.				

HRYN DEVELOPMENT, INC.,		

	Defendant-Appellee.

)	Appeal from the 

)	Circuit Court

)	of Cook County

)

)	No. 97 CH 13904

)

)	The Honorable

)	Paul P. Biebel,

)	Judge Presiding.

	JUSTICE COUSINS delivered the opinion of the court:

	Plaintiffs, Anthony and Marcella Jones, filed suit in the

circuit court of Cook County seeking recovery of purchase monies

paid to Hryn Development (defendant) for a newly constructed

house.  Defendant sold the house to a third party when plaintiffs

failed to close on two occasions.  Defendant refused to return

plaintiffs' purchase monies.  The three-count complaint sought:

(1) declaratory judgment that a liquidated damages clause in the

real estate contract was unenforceable;  (2) recovery of all

funds paid toward the purchase of the house under theories of

unjust enrichment and rescission; and (3) prejudgment interest.  

	Defendant filed a two-count counterclaim for declaratory

judgment.  Count I alleged that it was entitled to the earnest

money in its entirety pursuant to the liquidated damages clause. 

Count II alleged that it was additionally entitled to recover

actual damages resulting from plaintiffs' breach of contract.  

	The trial court granted partial summary judgment in favor of

plaintiffs on count I, finding that the liquidated damages clause was an unenforceable penalty.  The court denied plaintiffs' motion for summary judgment on counts II and III of the first

amended complaint and denied defendant's motion for summary

judgment of the counterclaim.  The court instructed the parties

to submit memoranda and briefs regarding the disbursement of the

monies paid by plaintiffs and retained by defendant.  After the

parties had done so, the trial court denied plaintiffs' request

for rescission, found that plaintiffs were entitled to a partial

refund of their expenditures and denied plaintiffs' request for

prejudgment interest.  

	Plaintiffs appeal, we reverse and remand with directions.

 BACKGROUND

	In August of 1994, plaintiffs entered into a contract with

defendant for the construction and purchase of a single-family

home in Matteson, Illinois.  The contract required that the

purchaser obtain a loan commitment before construction of the

house began.  Plaintiffs received such a commitment and

construction was commenced and completed.  The first closing date

was set for May 18, 1995; however, plaintiffs' lender did not

provide financing for the house and the closing was delayed. 

Plaintiffs were allowed additional time by defendant to obtain

financing.  Another closing date was set on June 6, 1995;

however, plaintiffs did not obtain financing and did not appear

at the closing.  Defendant sold the house to a third party on

July 15, 1995. 

	Approximately two weeks after the sale of the house to the

third party, plaintiffs demanded that defendant return all monies

paid toward the purchase of the house.  Defendant declined,

relying on the liquidated damages clause in the contract.  When

plaintiffs' efforts to recover the purchase monies failed, this

action was filed in the circuit court.  

	The relevant facts are undisputed.  The following was taken

from the joint statement of uncontested facts filed by the

parties with the trial court: (1) plaintiffs contracted with

defendant to purchase the house for $152,540;  (2) plaintiff paid

earnest money to defendant in the amount of $15,252.40; (3)

plaintiffs paid defendant $5,632.41 to purchase upgrades to the

house prior to the sale; (4) plaintiffs paid $1,751.51 to third

parties for other upgrades to the house prior to closing; and (5)

plaintiffs paid $150 to the local school district in order to

receive a building permit.  The total paid toward the purchase of

the home was $22,786.32.

	After discovery was conducted, plaintiffs filed a motion for

summary judgment and defendant filed a cross-motion for summary

judgment.  Plaintiffs' motion urged the trial court to find the

liquidated damages clause to be unenforceable, that the monies

paid toward the house be returned under theories of unjust

enrichment and rescission, and that prejudgment interest be

granted.  Defendant's motion sought a declaration that the

liquidated damages clause was enforceable and that it was entitled to all monies paid toward the house.  Defendant further

requested that the court declare that it was entitled to seek

actual and consequential damages pursuant to a breach of contract

theory. 

	The trial court granted partial summary judgment in favor of

plaintiffs, finding that the liquidated damages clause was an

unenforceable penalty.  The court denied plaintiffs' motion for

summary judgment on the remaining issues.  Defendant's motion for

summary judgment on the first issue was denied.  Count II of its

counterclaim, which related to the second issue in defendant's

motion for summary judgment, was voluntarily dismissed.  The

court further instructed the parties to file a motion and briefs,

based on the court's grant of partial summary judgment, to

determine how the funds should be disbursed.  The court also

indicated that it would render its ruling on the plaintiffs'

other issues when it decided the disbursement issue.  

	After the parties complied with the trial court's

instructions, the court issued its order.  The court denied the

plaintiffs' prior motion for rescission, granted the motion

relative to unjust enrichment and ordered the defendant to return

$11,894.16 of the purchase monies applied toward the house.  The

trial court reasoned that the plaintiffs were entitled to the

entire $22,786.32 they paid to the defendant minus the $10,892.16

in "expenses" that the defendant incurred as a result of

plaintiffs' failure to close.  The trial court further denied the plaintiffs' request for prejudgment interest.  

	Plaintiffs appeal from the order of the trial court alleging

that the trial judge did not take into consideration the sale

price of the house to the third party and that no actual damages

were suffered by defendant notwithstanding the "expenses"

incurred by defendant.  Plaintiffs also allege that the trial

court abused its discretion by denying prejudgment interest.   

ANALYSIS

	Plaintiffs contend the trial court erred by failing to order

defendant to return all monies paid toward the purchase of the

house because defendant suffered no actual damages.  Plaintiffs

rely primarily on Grossinger Motorcorp, v. American National Bank & Trust Co., 240 Ill. App. 3d 737, 640 N.E.2d 1337 (1992).  Defendant contends that plaintiffs are either entitled to no

return or that the trial court should have allowed only $5,894.93

in damages1.  Defendant's basis is that the instant case is factually distinguishable from Grossinger. 

	The uncontested facts establish that defendant was willing

and able to sell the house at the contract price on two occasions

before selling the house to a third party.  The house was sold to

the third party for $175,000, the upgrades had been made and the

school district fee had been paid for by plaintiffs.  Defendant

did incur costs of $10,892.16 that it would not have incurred if

it had sold the house to plaintiffs.  

	Plaintiffs argue that when a liquidated damages clause is

held to be unenforceable, the nonbreaching party is only entitled

to recover actual damages2.  Grossinger, 240 Ill. App. 3d at 752.  Plaintiffs contend that defendant did not suffer any actual

damages resulting from plaintiffs' breach because defendant sold

the house for $22,460 more than it would have received if it had

sold the house to plaintiffs.  Essentially, plaintiffs claim that

all monies should be returned because defendant profited from the

sale of the house to the third party in the amount of $11,567.843 after subtracting the cost incurred as a result of plaintiffs'

failure to close.  

	Defendant claims that only $5,894.93 of the monies should be

returned to plaintiffs.  Without citing to any authority,

defendant calculates its damages as follows:  $142,465.50 cash

received from the third party at closing minus $10,892.16

(expenses incurred as a result of plaintiffs' failure to close)

for a total of $131,573.34 received from the sale of the house. 

Defendant then subtracted the amount it would have received from

plaintiffs at closing, $125,678.41, to arrive at the amount of

$5,894.93.  

	Relative to the recovery of damages by a seller when a

liquidated damages clause in a real estate contract is an

unenforceable penalty, Grossinger lays down a clear rule that only "actual damages" are recoverable.  Grossinger 240 Ill. App. 3d at 752.  In Grossinger, the plaintiff auto dealer sued the defendant seller of real estate seeking return of its earnest

money paid to defendant to purchase land.  The defendant held the

earnest money pursuant to an optional liquidated damage clause

when the plaintiff failed to obtain rezoning from the village

where the land was situated.  The defendant then sold the land to

a third party for $1,250,000 more than the plaintiff's contract. 

The trial court awarded the earnest money to the defendant as liquidated damages because the plaintiff breached the contract. 

Grossinger, 240 Ill. App. 3d at 738-39.  

	In Grossinger, the defendant did not suffer actual damages because it sold the land at a substantially higher price than the

original contract price.  Grossinger, 240 Ill. App. 3d at 752. This court found the liquidated damages clause to be

unenforceable.  Grossinger, 240 Ill. App. 3d at 750.  We further determined that, because the liquidated damages clause was

unenforceable, the defendant was only entitled to recover "actual

damages" resulting from the breach.  Grossinger, 240 Ill. App. 3d at 752.

	The purpose of damages is to place the nonbreaching party in

a position that he or she would have been in had the contract

been performed, not to provide the nonbreaching party with a

windfall recovery.  American National Bank & Trust Co. of Chicago v. Erickson, 115 Ill. App. 3d 1026, 1030, 452 N.E.2d 3 (1983); Grossinger, 240 Ill. App. 3d at 752.   

	In the instant case, the facts are undisputed that defendant

sold the property for $22,640 more than the contract price

promised to plaintiffs.  Defendant incurred $10,892.16 in costs

due to plaintiffs' failure to close.  Since defendant profited

from the sale of the house to the third party, notwithstanding

the costs incurred as a result of plaintiffs' breach, defendant

incurred no actual damages.  Here, the trial court erred by not

ordering defendant to return the entire sum of plaintiffs' purchase monies.  

	Plaintiffs also contend that the trial court abused its

discretion by denying plaintiffs prejudgment interest on the

earnest money that defendant improperly withheld.  In Illinois,

prejudgment interest is available in equity without the need of

statutory authority.  Finley v. Finley, 81 Ill. 2d 317, 332, 410 N.E.2d 12 (1980).  Plaintiff argues that prejudgment interest is

necessary to fulfill the equitable goal of making the plaintiffs

whole.  Plaintiffs rely on Finley, 81 Ill. 2d at 332, People ex rel. Hartigan, 148 Ill. 2d 348, 405-06, 592 N.E.2d 1066 (1992), and In re Estate of Wernick, 127 Ill. 2d 61, 86, 535 N.E.2d 876 (1989).  While not analogous, we consider Finley, Hartigan, and Wernick to be instructive relative to whether prejudgment interest can be imposed in the instant case.  Prejudgment

interest may be recovered when warranted by equitable

considerations and disallowed if such an award would not comport

with justice and equity.  Finley, 81 Ill. 2d at 332.  The determination of whether circumstances support an award of

interest is within the sound discretion of the trial court.  In re Estate of Wernick, 127 Ill. 2d at 87.  Such a determination will not be disturbed on review unless it constitutes an abuse of

discretion.  Finley, 81 Ill. 2d at 332. 

	Here, plaintiffs urge this court to reverse the trial

court's decision to deny prejudgment interest because the trial

court failed to adequately consider the merits of their request.  Plaintiffs rely on West Suburban Bank v. Lattemann, 285 Ill. App. 3d 313, 318, 674 N.E.2d 149 (1996).  In West Suburban Bank, the trial court failed to consider a request for interest where a

party was allowed to benefit from the use of money resulting from

an improper judgment that was later reversed.  West Suburban Bank, 285 Ill. App. 3d at 318. 

	In West Suburban Bank, the trial court refused to consider prejudgment interest, finding that the plaintiff's request for

interest was moot.  West Suburban Bank, 285 Ill. App. 3d at 315.  In our view, West Suburban Bank is instructive, although, here, the trial court did not refuse to consider the request but,

rather, rejected the request for prejudgment interest, stating

that plaintiffs caused defendant to incur expenses due to

plaintiffs' failure to close.  

	Here, the profits exceed the expenses.  Even accepting the

trial court's finding that plaintiffs' breach of the contract

caused defendant to incur the "expense" of again putting the

property up for sale, any expenses incurred, unless such expenses

exceed profits, do not constitute a predicate for denying

prejudgment interest. 

	Equitable interest may be awarded as a part of restoration

due a party upon reversal of a judgment.  Ryan v. City of Chicago, 274 Ill. App. 3d 913, 919-20, 654 N.E.2d 483 (1995);  Hutson  v. Wood, 263 Ill. 376, 393 105 N.E. 343 (1914).  The amount of prejudgment interest that may be allowed depends on all the circumstances and the determination is within the trial

court's discretion.  West Suburban Bank, 285 Ill. App. 3d at 318.

A trial court properly exercises its discretion when it assumes

the relevant facts, applies the proper legal standard and reaches

a reasonable conclusion.  5 Am. Jur. 2d Appellate Review § 695 (Supp. 1999).  In the instant case, the trial court decided to

allow defendant some recovery even though defendant did not incur

actual damages and was entitled to no recovery.  As a result, the

trial court did not apply the proper legal standard and reach a

reasonable conclusion.  Therefore, the trial court abused its

discretion.

	 The judgment of the circuit court is reversed and this case

is remanded with directions to the trial court to allow

plaintiffs full recovery in the amount of $22,786.32 and to also

conduct proceedings to determine the amount of prejudgment

interest that plaintiffs are allowed to receive.  

	Reversed and remanded with directions.  

	McNULTYNA and COHEN, JJ., CONCUconcur. A