An ambitious new ski resort and condominium lodge in West Virginia is hovering between bankruptcy and the auction block this month as the developer and the Federal Savings and Loan Insurance Corp. feud over the terms of the resort's construction loans.

Originally billed as a "$500 million, quality four-season resort" by developer American Resort Services, Silver Creek now stands partially built, languishing under approximately $5 million in mechanics liens and a $33.5 million debt to FSLIC.

FSLIC, which became involved in the project after closing down Silver Creek's primary lender, San Marino Savings and Loan of Orange, Calif., is planning to foreclose and auction off the property next Friday. ARS officials, however, said they believe they will be able to work out a negotiated settlement with FSLIC before then that will allow ARS to continue with the development.

"We still plan to build a first-class ski resort," said ARS President John J. Kruse. "When San Marino was taken over by FSLIC, our pre-sales had more than justified ongoing loans if we were still with a private lender. But FSLIC is not in the business of making more loans, and that has been the problem. It has stalled us, but hasn't hurt us that bad yet."

If ARS and FSLIC cannot reach an agreement, however, ARS is prepared to file for a Chapter 11 bankruptcy to protect its assets from being sold, Kruse said.

Silver Creek is situated in the mountainous region around the town of Slatyfork and near the established Snowshoe ski resort. The new resort was designed as an amenity-laden, year-round facility projected to eventually total 8,500 housing units on 2,600 acres.

Marketing brochures distributed last year said that the first part of the resort, the Lodge at Silver Creek, would have 450 condominium units in a sprawling, five-wing complex at the base of a 24-run ski bowl, with an ice rink, indoor shopping mall and atrium, swimming pools, and tennis and racketball courts.

Kruse said that 250 of the units at the lodge have been built and are ready for occupancy, but that ARS cannot settle on the units until the problems of the mechanics liens are cleared up and an agreement reached with FSLIC about how the federal insurance agency will recover its debt.

Some of the other 200 units are sold but not yet built. Of the proposed amenities, only about half of the ski slope and the two swimming pools are developed. The shopping mall is still on the drawing boards.

Ironically, despite the slowdown in work on the project, Silver Creek's problems have had little to do with a lack of buyers for the approximately $80,000 to $120,000 condominium units.

In fact, more than 350 people -- many of whom are from the Washington-Baltimore area -- are waiting to go to settlement on condos at the development, according to Kruse. More than 100 persons signed contracts this winter, despite obvious delays in the resort's development, he added.

"I've been waiting since February of 1984 to settle on my two-bedroom unit," said one potential Silver Creek condo owner, Antti Helne, a disbursement officer with the World Bank. "I still want to, because I think if Silver Creek is built out the way they promised, it would be a good place."

Although other contract buyers are not as eager as Helne and say they are waiting to see what kind of agreement will be reached with FSLIC, most signed contracts that gave the developer up to two years to reach settlement, and therefore they do not yet have the legal right to back out.

Kruse said ARS had lost several people whose contracts had expired, but that the company had renewed other contracts. To sweeten the deal, ARS has offered to give every contract home buyer caught in the delay a 40-year membership that will include free skiing and golfing so long as ARS retains control of the development.

In a letter sent to contract home buyers last month, ARS reported that it lost $750,000 on the ski operations last season, but made a Silver Creek was designed to function as a condominium- hotel, a new breed of resort development that is supposed to provide investors with a vacation home and a tax shelter. profit of approximately $3 million on $18 million in condominium sales. The company also said, however, that the profit existed only "on paper," because the sales had not gone to settlement.

In addition to the lodge, ARS has plans to start construction of a 500-acre golf course complex and additional housing units this summer or fall. Riding stables, hiking trails and man-made lakes also were planned, along with additional condos, town houses and single-family homes.

FSLIC officials could not be reached, but a source close to the negotiations said that FSLIC is considering several proposals being offered by outside lenders to pay off the FSLIC debt while allowing ARS to retain control of the development. Kruse confirmed that ARS "has some outside financing," but declined to give details.

When FSLIC first moved to become conservator of the San Marino S&L in February 1984, none of the development had been started. FSLIC allowed disbursement of about $20 million for construction of the project, but later stopped approving new loans to Silver Creek when it moved to liquidate San Marino last December, Kruse said.

"If we had assumed our lender would fail, yes, I guess you could say the project had been underfinanced, but with regard to the economics of the project, no, I think it has a proven level of marketability," he said. "It's a cash-flow problem related to delays in dealing with a government agency, that's all."

According to Kruse, the mechanics liens are "not as high as represented by the court filings," because several contractors have filed duplicate liens for the same debt. He would not say how much of the $5 million in liens was actual debt, but did say that ARS had reached a "prospective agreement" with the general contractor, McDevitt and Street of Charlotte, N.C.

Silver Creek was designed to function as a condominium-hotel, a new breed of resort development that is supposed to provide investors with a vacation home and a tax shelter. Owners can use their unit all year or limit family use to two weeks a year and derive tax benefits by renting it like a hotel room during the rest of the year. The units were to be sold furnished, and the developer planned to provide a service to handle the rentals.

Keith Romney, a resort development consultant, said that lenders have become increasingly reluctant to put up the enormous equity required to build four-season resort communities laden with glamorous amenities and that condo hotels can be a "very handy financing tool," especially if developers can sell units before constructing them.

Kruse said that ARS rented some of the units this winter and provided others free of charge to contract home buyers, but that he does not know how much the resort had made through the rentals. "It's always less lucrative than you hope it will be," he commented.

Philip V. McGance, a staff assistant for Sen. John D. Rockefeller IV (D-W.Va.), said that there could be an "agreement in principle" between FSLIC and ARS sometime in the next week.

"This was a ski resort. It represented a lot of jobs and was a major development for West Virginia, so we tried to help encourage FSLIC to sit down and talk with ARS," McGance said. "I think they are close to an agreement."