In a story about Chesapeake Beach, Md., yesterday, The Washington Post reported that a Town Council member had once been accussed of threatening to "get" the Mayor Hugh Ward Jr. The Council member, through his attorney, said yesterday that he denied the allegation at the time and continues to deny it.

It was touted as "The Great Seaside Suburb of the National Capital" - only a 25-cent, 45-minute train ride from Washington. It was to become Monte Carlo, Newport and Coney Island all rolled into one on Chesapeake Bay in Calvert County, Md.

But the Depression put the railroad out of business. And the end of the slot-machine era in the late 1960s sounded what many thought would be the economic death knell of the once hopeful resort community.

It might have all ended there except for one thing: Chesapeake Beach has land, lots of it, all ripe for development and all near Washington where land for development has become scarce and expensive. To this bayside community, that fact has given rise to hopes for a new boom, but in the process it has also divided this town of 1,000 people, setting neighbor against neighbor.

The cast of characters among the warring factions is impressive: both camps include most of those residents with some influence in the community. On one side are some of the oldest families of Chesapeake Beach. The other includes some relative newcomers and a corporation owned 90 percent by "outsiders."

But it isn't simply another battle between old-timers fighting off hungry outsiders eager to take advantage of a sleepy little town. In fact, both sides say that the development of their long-overlooked community is inevitable, and most are looking forward to it.

Rather, both sides appear to have large financial stakes in when, how, and where that growth occurs, resulting in a situation where nearly everybody involved is alleged to have some conflict of interest.

For instance, the town's own "special attorney" also represents the Chesapeake Beach Parks company that owns the town's largest restaurant, a marina, the only beach, and the old amusement park land - 20 acres altogether, all ripe for development. In addition, he has also represented Union Vending Co., the one-time dominant slot-machine interest here. Several Town Council members have had direct or indirect relationships with one or the other firm as well.

Chesapeake Beach Parks (known among locals as CPI or, simply, "the Park"), in which Union Vending is a major stockholder, numbers among its owners the old families of Chesapeake Beach.

The other side is led by ex-mayor Hugh W. Ward Jr. Ward was mayor when his company, Robinwood, began development on 250 acres set back from the bay. During his incumbency, those people in the opposition camp to whom he now ominously refers as representing "the slot interest," were accusing him of conflicts of interest.

"This town grew from a wilderness and ran its whole course in about 75 years," said Ward, a Paul Bunyonesque figure at 6-feet-5 and 285 pounds. "Now what you're seeing is the politics of decline. They're so busy milking the dying cow, they're too busy to worry about resuscitation." Current Mayor William L. (Buster) Fortier, a lean-looking, 68-year-old man with a white crew cut, takes a different view. "It's kind of hard to tell a city fellow small town problems," Fortier, a onetime newspaper photographer recently retired from NASA, told a reporter. "You only have a few people to work with. There are local gossips and animosities, like family fights once in a while."

For Chesapeake Beach, the current conflict is the latest chapter in a history that never quite lived up to its founders' visions.

The town was the turn-of-the-century dream of Otto Mears, a Colorado railroad tycoon whose name is now borne by one of the town's streets. People came by steamship from Baltimore, Annapolis and Norfolk as well as by the Chesapeake Beach Railway that Mears built from Washington, just to stroll the boardwalk and enjoy its amusement park. Later, they came to listen to the big bands, and from 1949 to 1968, to play the slots that made a poor man's Las Vegas out of southern Maryland.

But the hoped-for grand hotels never really materialized. Instead, modest cottages were more the rule. And a race track, built but never opened, ended up being dismantled, its grandstand used to build the boardwalk, and the wood in its stables going toward the erection of a church. The amusement park's clubhouse went in a 1922 fire, while the town boardwalk was destroyed in a 1929 storm.

Today, the amusement park is closed. Its once ornate bayside buildings are in shambles and its carousel horses are now in use at the Prince George's County's Watkins Regional Park. Nearby, the railroad station is shuttered. Its tracks disappeared long ago.

From 1953, when the town incorporated, until his death in 1963, Wesley Stinnett, local CPI manager, held the nonpaying post of mayor. He was succeeded briefly by Frederick J. Donovan, his son-in-law who also had CPI connections. Then, from 1964 to 1973, Fortier, whose CPI connections are limited to his having bought property from the company, was chief executive. Paul V. Smiley, local Union Vending manager, followed as mayor until his resignation and Ward's selection by a coin flip in April, 1975.

As mayor, Ward inherited a zoning application from a developer who wanted to build high-rise buildings on CPI's valuable amusement park land. That property, however, happened to be bisected by two town "paper" streets that had never been built but were still part of the original town plan of 1899. Their acquisition from the town was deemed vital to any development of the tract.

In the past, such town "paper" streets had been deeded over for free to both Stinnett and Fortier during their terms as mayor, according to Fortier. But not this time. Saying that the two "paper" streets provided virtually the only access to the town's boat harbor, Ward opposed the deeding and sought to impose a costly zoning fee.

Four lawsuits were quickly filed in the wake of the Ward administration's refusal to grant the needed approvals: three suits by CPI and one by two former town officials. Both groups were to be represented in court by the same attorney, Gerald Klein, of Baltimore.

Meanwhile, Ward's Robinwood Corporation had acquired 250 acres and embarked on the construction of 50 new homes with another firm doing the actual building. Ward today insists that as mayor he had nothing to do with the issuing of the necessary town permits to his firm.

Charges to self-dealing led to an ultimately inconclusive six-month-long grand jury probe of the Ward administration. At the same time, one Town Council member was convicted of a gun possession charge and fined $300 in connection with an incident in which he allegedly threatened to "get" Ward.

In November, 1976, the town voters decisively defeated Ward and his Town Council allies in their bids for re-election, changing the whole complexion of the growing battle. In their place, Fortier and others whom Ward characterizes as being "closely associated with the Park" were elected. Shortly after the Fortier administration took office, the Council voted to deed over the two "paper" streets to CPI and to hire Gerald Klein as special town attorney.

"When it comes to hiring an attorney," said Fortier, "what attorney doesn't have a conflict of interest?"

Ward said he immediately began to experience difficulties in dealing with the town on behalf of Robinwood. The new administration declined to issue him zoning and occupancy permits because it said he had failed to file proper subdivision plans and pay for street paving and other improvements. Ward promptly filed suit.

"It's a clear effort to put me out of business or run me out of town," said Ward.

"This is no harassment," answered Fortier.

We treat him like any other developer."

The town admitted, however, in papers filed in the Robinwood suit, that it has treated two other builders differently. These builders were subsequently informed by town attorney Klein that they, too, must comply with the letter of the local laws.