An Alexandria company has acknowledged it sued subterfuge in acquiring a 195-acre Virginia estate as a site for a major sludge and trash composting facility in King George County, Va., that would dispose of District of Columbia waste.

Dano Resource Recovery, which has a $20 million contract with the city to dispose of sewage sludge, set up a dummy corporation to acquire Chatterton, the site in King George County, and to get building permits, Dano vice president Robert N. Picardat acknowledged.

Picardat said real estate agents for the dummy company -- Southern Marine & Salvage Limited Partnership -- told the owner of the estate that the purchaser intended to subdivide the property into smaller estates.

Although King George officials later revoked bilding permits issued to Dano because of alleged inconsistencies in its building proposal, Picardat said Dano will go ahead with its plans.

"If this is their (King George County's) best shot, I'm glad they took it," Picardat said. "If you want to do things on the up and up, you can't get them done."

In a letter to George L. Wallace, King George's acting administrator and building inspector, Picardat said bluntly: "We do not concede or recognize that the permits previously issued us were revoked in accordance with the laws of the Commonwealth of Virginia."

Despite the legal uncertainties, Picardat said Dano will go to settlement next Tuesday for purchase of what would be the composting facility -- the 195-acre Chatterton estate, whose broad greenward rises majestically from the potomac to a white block mansion dating to the early 1800s.

County officials, examining the application to build on the estate, were struck by the large dimensions of a proposed "barn" -- 168 feet by 360 feet. In fact, the "barn" would be the building where huge (100 feet long, 12 feet in diameter) drums would be used to mix trash and sludge and begin the composting process.

"If the permit isn't upheld," Picardat said, "we will have a nice piece of property for which we paid too much money." He said Dano has agreed to pay $495,000 in cash to the property's owner, Washington attorney Donald S. Dawson.

On Tuesday, Dano's surveyors were at the property, about 50 miles south of Washington, making plans for the $11 million composting plant that will be built at the river's edge.

The stakes are big for Dano. If it can't build the composting facility, the Zurich-based company stands to lose a $20 million, five-year contract for disposal of the cityhs aludge and a $12.5 million contract -- awaiting only Mayor Marion Barry's signature -- for disposal of the cityhs trash.

The District of Columbia would have serious problems, too. It might have to build a composting plant in the city. Earlier plans to do just that aroused considerable neighborhood wrath and were abandoned by the Walter Washington administration.

The three-member King George Board of Supervisors ordered Dano's building permit revoked on the recommendation of County Attorney Jhon P. Harris III.Harris said he urged the board to act because Dano had made what he called inconsistent proposais on where it would dispose of soil that would be dredged from the Potomac River during construction.

Picardat insisted "we have met every requirement," but in a written reply to Wallace he said Dano's disposal plan was undecided because the State Water Control Board and U.S. Army Corps of Engineers rejected the original disposal site.

Dano originally sought to build its facility in Prince William County, but the county planning commission, rejecting staff recommendations voted no. Then Dano tried to go farther downriver, to Stafford County. That county's Planning Commission recommended approval, but the Board of Supervisors voted no.

On the advice of a Woodbridge attorney, Richard Nagoette, Dano then settled on King George, which unlike Prince William and Stafford, has no zoning ordinance to use as a weapon to keep a controversial industry from coming to the county.

Picardat said that the real estate agents for Southern Marine, the dummy company set up to buy Chatterton, told Dawson, Chatterton's owner, that the purchaser intended to subdivide the property into smaller estates selling for about $200,000 each.

Dawson did not return a reporter's telephone calls. Dano officials confirmed yesterday that Dawson will turn over the property at next Tuesdayhs settlement. "There was nothing in the contract about estates," Picardat said.