PROVIDENCE – A lawsuit accusing Woonsocket of illegally selling a U.S. Housing and Urban Development-owned property is being hotly contested in federal court, with Woonsocket claiming the agency “sat idly by” over four years as the home was renovated and ultimately flipped for profit.
HUD sued the city and the previous and current owners of 294 Rhode Island Ave. over the 2019 sale of the property for unpaid taxes to Reservoir Adventures, LLC for $27,784.25. The agency argues the sale should be declared null and void and asks the court to return the property to HUD ownership.
Federal government says city had no right to sell property
HUD accuses Reservoir Adventures, Jorge L. Jorge, and Tanya A. Mayumbo, the current owner, of unjust enrichment and trespass.
Jorge, of Dallas, Texas, purchased the three-family home from Reservoir Adventures, LLC for $275,000 in 2022. In April, he sold it to Mayumbo “despite having notice of HUD’s interest in the property” for $525,000, the complaint says.
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HUD argues the U.S. Supreme Court and other federal courts have consistently held that state and local governments may not sell federally-owned property to recover unpaid taxes under the property and supremacy clause of the U.S. Constitution and the doctrine of sovereign immunity.
HUD had held title to the property since 2017, when the house went into foreclosure and was backed by a HUD-insured loan.
City: HUD sat on its rights
The city, the owners and Navigant Credit Union, which is carrying Mayumbo’s mortgage, all deny HUD’s allegations. They ask the court not to unravel the prior transactions.
Doing so "would result in a completely inequitable outcome, since HUD would have free and clear title to property which has been substantially improved over years all while plaintiff sat on its rights,” the city’s lawyer, Michael J. Lepizzera Jr. wrote.
They argue HUD should not be allowed to reap the benefits of the “substantial” renovations performed to the property by others.
“Instead of protecting its interests, HUD did little to nothing but appears to have ignored its alleged ownership interests in the Property,” the city said.
The city argues, too, in its counterclaim that HUD should be held liable for all prior taxes levied against the property before it took title, as well as all other taxes if the court declares the agency the owner.
The city and Reservoir Adventures are seeking compensatory damages should the court rule in HUD’s favor.