Midlake on Big Boulder Lake, Condominium Association v. Cappuccio

Ronald and Sondra Cappuccio (defendants) owned a condominium in the Midlake on Big Boulder Lake condominium community. The condominium association (plaintiff) sued the Cappuccios to enforce a declaration prohibiting unit owners from placing signs in their windows without prior board approval. The association brought the suit after the Cappuccios placed two computer-generated “for sale” signs in their window and refused the association’s request to comply with the sign restriction. The Cappuccios counterclaimed to prohibit the association from enforcing the restriction. Before trial, the Cappuccios removed the signs when they rented their unit. The association offered to withdraw its complaint if the Cappuccios would sign a stipulation agreeing that they would not post any signs in the future, but they declined. The trial court noted that although the matter was moot, because the freedom-of-speech issue affected the interests of all unit owners and could otherwise escape review, it would decide the issue. The trial court then dismissed the association’s claim and granted the Cappuccios’ counterclaim, finding that if the association enforced the sign restriction, it would be state action under the United States Supreme Court’s decision in Shelley v. Kraemer, in which the Court held that racially restrictive covenants in real property deeds prohibiting the sale of property to non-Caucasians violated the Equal Protection Clause of the Fourteenth Amendment. The association appealed. The Cappuccios argued that because the association was organized under state law, the establishment of the association was state action or, alternatively, that the condominium was comparable to a company town or mini-municipality.