WHEN CONGRESS ESTABLISHED the Resolution Trust Corporation three years ago, its purpose was to salvage deposits wiped out in the savings and loan debacle and to do so by selling foreclosed property. But a quirky addendum to the emergency act that created the RTC mandated that a certain percentage of the properties had to be sold to low-income families. Although the gesture seems laudable, this fusion of social legislation and financial reform has been unstable at best. Now a fight over a condominium unit in the windswept fishing resort of Port Aransas may prove that the low-income rider is also unconstitutional.

Pelican Condominium is a 22-year-old cedar-shingled brick complex facing the ocean in the heart of the tiny tourist resort of two thousand. As condos go, the 65-unit Pelican is financially stable. Sold out for years, it is even a year-round home for some residents, says Sharon Butler, who has managed the Pelican for nine years. Actually, the complex isn’t completely sold out: one unit—number 104—was foreclosed on when University Federal Savings Association declared insolvency in 1988. Unit 104, a second-story three-bedroom dwelling with an ocean view, was taken over by the RTC and auctioned off in June 1991 to a bidder who offered just $10,300. But the sale has never gone through. Instead, the RTC is suing the Pelican, the complex has countersued, and a bewildering legal battle looms. As the Pelican struggles to unravel the tangle of problems presented by the suits, Butler still believes the issue is simple: “Can the RTC do anything it wants?”

Butler and the Pelican’s board of directors have made it clear what they want: an option to buy the condo. Says Dallas attorney Jay S. Fichtner, who is a condo owner and also on the board, “Our condominium declaration, which is a part of the original deed and is as much a part of the real estate law of Nueces County as any other deed, provides for the right of first refusal.” He adds, “When we heard that the unit had sold for $10m300, we assumed we were going to get to match the bid. We thought, ‘This is too good to pass up.’ “

Fichtner and the board thought wrong. According to the RTC, the Pelican condo unity—which RTC appraisers from the Houston office valued at about $40,000, although comparable units in the complex had recently sold for as much as $59,000—qualified for low-income housing because of its low appraisal. Laurel Powers, head of the affordable housing department in Houston, defends the appraisal and adds, “We have gotten about ninety-seven cents on the dollar for the properties we have sold—and we have sold more than any other RTC office in the country. We have been very aggressive.” And the condominium corporation didn’t qualify as a low-income buyer. No matter what their bylaws say, the Pelican can’t make an offer.

“We were naive,” says Fichtner. “At the time, the price and its implications of depressed market value were the only reasons we were interested in buying. We were trying to protect our investment in the condominium complex.

Fichtner, Butler, and other residents all insist that the idea of a low-income family living in their midst did not bother them. Says retired General Electric employee Jim Wettersten: “If they can pay the bills, I think affordable housing is a great idea.”

Paying the bills was a problem for Butler, as manager, worried about though. “A resort condo isn’t for a person on a limited budget,” she says. Annual assessments at the Pelican are $2,100 “That increases every two or three years,” say Butler. In addition, emergency assessments—such as the stabilizing of the concrete patio landings two years ago—have called for an extra $2,200. The threat of storm damage is constant too, which could always mean more emergency assessments. When other costs such as taxes, insurance, and upkeep are considered, Butler wonders how anyone in the low-income category would feel comfortable living with such financial uncertainty. Fichtner says, “I personally feel that when the affordable housing provision was enacted, recognition wasn’t given to its effect on condos.”

Ironically, worries about a low income family setting up house in the vacation retreat never materialized anyway—the purchase of the property turned out to be someone who, if not low-income, certainly had no history of being low-income. Wendell Phillips, who is in his early sixties, is a retired certified life underwriter who lives in San Antonio’s north-side Terrell Hills neighborhood. He has occasionally been featured on the society pages of the San Antonio newspapers, and his wife Ann, was a debutante. “”Phillips is the type of person we’d like to have move in here,” says Butler. Phillips is legally blind, and the couple lives on Social Security, according to their son John, who arranged the purchase of unit 104. “My father considered his finances and decided what he could afford,” says John Phillips. “He met all the RTC’s requirements.

Whether Phillips does or does not meet all the guidelines isn’t a matter of concern to the RTC. Says Laurel Powers: “At the time Mr. Phillips purchased the property, all that was required to prove eligibility for the affordable housing program was self-certification.

So why doesn’t Pelican Condominium just thank its lucky stars that it’s Wendell and Ann Phillips who want to move in and let the sale go through? As the elder Phillips wonders, “I don’t understand the fuss myself.” But, says Fichtner, “Our information from the RTC says that particular unity then must remain as affordable housing for the effective life of the property.” Most resident sat the Pelican can visualize a time when a large corporation, such as a hotel, might want to buy the seaside complex. The owners would stand to make a considerable profit on their initial investment—that is, if all of the owners agree to sell. Unfortunately, unit 104 would be under the jurisdiction of another entity—either the RTC or the FDIC—thus forever preventing future sale. Laurel Powers at the RTC claims that once Phillips has acquired the property then her agency has no further involvement whatsoever.

Regardless of the outcome, all the owners agree, the $10m300 sale price offered now is just too low. “We wanted to make sure the property is sold at a reasonable price, and this isn’t,” says Fichtner.

Fichtner will use the Fifth Amendment guarantees of property rights to fight the case. “The RTC can’t deprive us of our property without due process of law,” says the lawyer. But with eight RTC layers on the case to the Pelican’s one, Fichtner’s argument may not triumph. The RTC has already filed several motions for summary judgment—saying that as a matter of law, the RTC is simply entitled to prevail. Sharon Butler isn’t optimistic:”I think this is real political, and nobody’s going to stand up and say it’s wring.”

In the meantime, the RTC continues to push its affordable housing program in this resort area—a similar case is pending over at the Casa del Cortez condominium complex down the road. And maybe sales to people like the Phillipses will be a snap. But, as Sharon Butler wonders, “How many low-income people can afford to live in a resort?” The Resolution Trust Corporation seems determined to find out.