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FIRST DIVISION

September 30, 2002

JUSTICE COUSINS delivered the opinion of the court:

Plaintiffs, Anthony and Marcella Jones, filed suit in thecircuit court of Cook County seeking recovery of purchase moniespaid to Hryn Development (defendant) for a newly constructedhouse. Defendant sold the house to a third party when plaintiffsfailed to close on two occasions. Defendant refused to returnplaintiffs' purchase monies. The three-count complaint sought:(1) declaratory judgment that a liquidated damages clause in thereal estate contract was unenforceable; (2) recovery of allfunds paid toward the purchase of the house under theories ofunjust enrichment and rescission; and (3) prejudgment interest.

Defendant filed a two-count counterclaim for declaratoryjudgment. Count I alleged that it was entitled to the earnestmoney in its entirety pursuant to the liquidated damages clause. Count II alleged that it was additionally entitled to recoveractual damages resulting from plaintiffs' breach of contract.

The trial court granted partial summary judgment in favor ofplaintiffs on count I, finding that the liquidated damages clausewas an unenforceable penalty. The court denied plaintiffs'motion for summary judgment on counts II and III of the firstamended complaint and denied defendant's motion for summaryjudgment of the counterclaim. The court instructed the partiesto submit memoranda and briefs regarding the disbursement of themonies paid by plaintiffs and retained by defendant. After theparties had done so, the trial court denied plaintiffs' requestfor rescission, found that plaintiffs were entitled to a partialrefund of their expenditures and denied plaintiffs' request forprejudgment interest.

Plaintiffs appeal, we reverse and remand with directions.

BACKGROUND

In August of 1994, plaintiffs entered into a contract withdefendant for the construction and purchase of a single-familyhome in Matteson, Illinois. The contract required that thepurchaser obtain a loan commitment before construction of thehouse began. Plaintiffs received such a commitment andconstruction was commenced and completed. The first closing datewas set for May 18, 1995; however, plaintiffs' lender did notprovide financing for the house and the closing was delayed. Plaintiffs were allowed additional time by defendant to obtainfinancing. Another closing date was set on June 6, 1995;however, plaintiffs did not obtain financing and did not appearat the closing. Defendant sold the house to a third party onJuly 15, 1995.

Approximately two weeks after the sale of the house to thethird party, plaintiffs demanded that defendant return all moniespaid toward the purchase of the house. Defendant declined,relying on the liquidated damages clause in the contract. Whenplaintiffs' efforts to recover the purchase monies failed, thisaction was filed in the circuit court.

The relevant facts are undisputed. The following was takenfrom the joint statement of uncontested facts filed by theparties with the trial court: (1) plaintiffs contracted withdefendant to purchase the house for $152,540; (2) plaintiff paidearnest money to defendant in the amount of $15,252.40; (3)plaintiffs paid defendant $5,632.41 to purchase upgrades to thehouse prior to the sale; (4) plaintiffs paid $1,751.51 to thirdparties for other upgrades to the house prior to closing; and (5)plaintiffs paid $150 to the local school district in order toreceive a building permit. The total paid toward the purchase ofthe home was $22,786.32.

After discovery was conducted, plaintiffs filed a motion forsummary judgment and defendant filed a cross-motion for summaryjudgment. Plaintiffs' motion urged the trial court to find theliquidated damages clause to be unenforceable, that the moniespaid toward the house be returned under theories of unjustenrichment and rescission, and that prejudgment interest begranted. Defendant's motion sought a declaration that theliquidated damages clause was enforceable and that it wasentitled to all monies paid toward the house. Defendant furtherrequested that the court declare that it was entitled to seekactual and consequential damages pursuant to a breach of contracttheory.

The trial court granted partial summary judgment in favor ofplaintiffs, finding that the liquidated damages clause was anunenforceable penalty. The court denied plaintiffs' motion forsummary judgment on the remaining issues. Defendant's motion forsummary judgment on the first issue was denied. Count II of itscounterclaim, which related to the second issue in defendant'smotion for summary judgment, was voluntarily dismissed. Thecourt further instructed the parties to file a motion and briefs,based on the court's grant of partial summary judgment, todetermine how the funds should be disbursed. The court alsoindicated 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'sinstructions, the court issued its order. The court denied theplaintiffs' prior motion for rescission, granted the motionrelative to unjust enrichment and ordered the defendant to return$11,894.16 of the purchase monies applied toward the house. Thetrial court reasoned that the plaintiffs were entitled to theentire $22,786.32 they paid to the defendant minus the $10,892.16in "expenses" that the defendant incurred as a result ofplaintiffs' failure to close. The trial court further denied theplaintiffs' request for prejudgment interest.

Plaintiffs appeal from the order of the trial court allegingthat the trial judge did not take into consideration the saleprice of the house to the third party and that no actual damageswere suffered by defendant notwithstanding the "expenses"incurred by defendant. Plaintiffs also allege that the trialcourt abused its discretion by denying prejudgment interest.

ANALYSIS

Plaintiffs contend the trial court erred by failing to orderdefendant to return all monies paid toward the purchase of thehouse because defendant suffered no actual damages. Plaintiffsrely 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 noreturn or that the trial court should have allowed only $5,894.93in damages⁽¹⁾. Defendant's basis is that the instant case isfactually distinguishable from Grossinger.

The uncontested facts establish that defendant was willingand able to sell the house at the contract price on two occasionsbefore selling the house to a third party. The house was sold tothe third party for $175,000, the upgrades had been made and theschool district fee had been paid for by plaintiffs. Defendantdid incur costs of $10,892.16 that it would not have incurred ifit had sold the house to plaintiffs.

Plaintiffs argue that when a liquidated damages clause isheld to be unenforceable, the nonbreaching party is only entitledto recover actual damages⁽²⁾. Grossinger, 240 Ill. App. 3d at 752. Plaintiffs contend that defendant did not suffer any actualdamages resulting from plaintiffs' breach because defendant soldthe house for $22,460 more than it would have received if it hadsold the house to plaintiffs. Essentially, plaintiffs claim thatall monies should be returned because defendant profited from thesale of the house to the third party in the amount of $11,567.84⁽³⁾after subtracting the cost incurred as a result of plaintiffs'failure to close.

Defendant claims that only $5,894.93 of the monies should bereturned to plaintiffs. Without citing to any authority,defendant calculates its damages as follows: $142,465.50 cashreceived 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 fromplaintiffs at closing, $125,678.41, to arrive at the amount of$5,894.93.

Relative to the recovery of damages by a seller when aliquidated damages clause in a real estate contract is anunenforceable penalty, Grossinger lays down a clear rule thatonly "actual damages" are recoverable. Grossinger 240 Ill. App.3d at 752. In Grossinger, the plaintiff auto dealer sued thedefendant seller of real estate seeking return of its earnestmoney paid to defendant to purchase land. The defendant held theearnest money pursuant to an optional liquidated damage clausewhen the plaintiff failed to obtain rezoning from the villagewhere the land was situated. The defendant then sold the land toa third party for $1,250,000 more than the plaintiff's contract. The trial court awarded the earnest money to the defendant asliquidated damages because the plaintiff breached the contract. Grossinger, 240 Ill. App. 3d at 738-39.

In Grossinger, the defendant did not suffer actual damagesbecause it sold the land at a substantially higher price than theoriginal contract price. Grossinger, 240 Ill. App. 3d at 752.This court found the liquidated damages clause to beunenforceable. Grossinger, 240 Ill. App. 3d at 750. We furtherdetermined that, because the liquidated damages clause wasunenforceable, the defendant was only entitled to recover "actualdamages" resulting from the breach. Grossinger, 240 Ill. App. 3dat 752.

The purpose of damages is to place the nonbreaching party ina position that he or she would have been in had the contractbeen performed, not to provide the nonbreaching party with awindfall recovery. American National Bank & Trust Co. of Chicagov. 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 defendantsold the property for $22,640 more than the contract pricepromised to plaintiffs. Defendant incurred $10,892.16 in costsdue to plaintiffs' failure to close. Since defendant profitedfrom the sale of the house to the third party, notwithstandingthe costs incurred as a result of plaintiffs' breach, defendantincurred no actual damages. Here, the trial court erred by notordering defendant to return the entire sum of plaintiffs'purchase monies.

Plaintiffs also contend that the trial court abused itsdiscretion by denying plaintiffs prejudgment interest on theearnest money that defendant improperly withheld. In Illinois,prejudgment interest is available in equity without the need ofstatutory authority. Finley v. Finley, 81 Ill. 2d 317, 332, 410N.E.2d 12 (1980). Plaintiff argues that prejudgment interest isnecessary to fulfill the equitable goal of making the plaintiffswhole. Plaintiffs rely on Finley, 81 Ill. 2d at 332, People exrel. 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, andWernick to be instructive relative to whether prejudgmentinterest can be imposed in the instant case. Prejudgmentinterest may be recovered when warranted by equitableconsiderations and disallowed if such an award would not comportwith justice and equity. Finley, 81 Ill. 2d at 332. Thedetermination of whether circumstances support an award ofinterest is within the sound discretion of the trial court. Inre Estate of Wernick, 127 Ill. 2d at 87. Such a determinationwill not be disturbed on review unless it constitutes an abuse ofdiscretion. Finley, 81 Ill. 2d at 332.

Here, plaintiffs urge this court to reverse the trialcourt's decision to deny prejudgment interest because the trialcourt 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, thetrial court failed to consider a request for interest where aparty was allowed to benefit from the use of money resulting froman improper judgment that was later reversed. West SuburbanBank, 285 Ill. App. 3d at 318.

In West Suburban Bank, the trial court refused to considerprejudgment interest, finding that the plaintiff's request forinterest 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, statingthat plaintiffs caused defendant to incur expenses due toplaintiffs' failure to close.

Here, the profits exceed the expenses. Even accepting thetrial court's finding that plaintiffs' breach of the contractcaused defendant to incur the "expense" of again putting theproperty up for sale, any expenses incurred, unless such expensesexceed profits, do not constitute a predicate for denyingprejudgment interest.

Equitable interest may be awarded as a part of restorationdue a party upon reversal of a judgment. Ryan v. City ofChicago, 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). Theamount of prejudgment interest that may be allowed depends on allthe circumstances and the determination is within the trialcourt's discretion. West Suburban Bank, 285 Ill. App. 3d at 318.

A trial court properly exercises its discretion when it assumesthe relevant facts, applies the proper legal standard and reachesa reasonable conclusion. 5 Am. Jur. 2d Appellate Review