The Pennsylvania Avenue Development Corp. (PADC) yesterday soundly rejected a plan-developed after weeks of secret negotiations with Washington developer Oliver T. Carr-that would have turned over to Carr part of a major downtown development site in exchange for some of his property and a promise by him not to sue.

The plan was a last-ditch effort by PADC to forestall a threatened lawsuit by Carr over his claim to be part of development work adjacent to the Willard Hotel.

Under the proposal, Carr would have given up his ownership in property adjoining the Willard in exchange for part ownership of the Kann's department store site, recently destroyed by fire and scheduled for massive redevelopment. Carr also would promise not to sue the PADC over his claimed development rights at the Willard.

The 8-to-1 vote to reject the proposal was a defeat for the PADC's new chairman, Joseph B. Danzansky, who personally negotiated the compromise with Carr over the last two months. Danzansky's was the sole vote in favor of the proposal in a 3 1/2-hour session that was closed to the public and the press.

Danzansky, chairman of Giant Food Inc., is a close friend of Carr's. Carr could not be reached for comment.

PADC members reached after the meeting asked not to be identified, but most said they rejected the proposal because it would have set a precedent of "appeasing" developers who lose out in the PADC bidding process.

Carr's complaint dates to last December, when he lost out to Florida shopping center developer Stuart S. Golding in the bidding for a $50 million project to restore the Willard at 14th Street and Pennsylvania Avenue NW and the adjoining site between the Willard and the Washington Hotel.

That adjoining site, where a parking garage and the old Occidental buildings now stand, is owned by Carr and the heirs of President Theodore Roosevelt.

Carr contends that the PADC cannot reject a development proposal from a Pennsylvania Avenue property owner as long as the owner is willing to go along with the 1974 PADC "grand plan" for the avenue.

In an interview last month. Carr said, "We maintain that if PADC had operated by the plan, which they violated. . . . we would have won the right to develop the site [next to the Willard]."

However, Danzansky replied, "We have always maintained that he [Carr] had no such rights." Danzansky emphasized that the "proposed settlement to a potential lawsuit" reached with Carr would not have given Carr development rights on the Kann's site, but merely title to the same amount of property (about 15,000 square feet) that Carr owns next to the Willard.

When Danzansky was named chairman of the government-chartered developmend agency last November, he pledged to conduct more of the agency's business in open meetings. However, Danzansky said Monday that land values might be discussed at yesterday's meeting and therefore represented an "extraordinary circumstance" justifying a closed session.

"That's my mind," Danzansky said. "It's decision. If I'm wrong, I'm wrong. I've been wrong many times in my life."

At least two members of the board, one of them Interior Secretary Cecil D. Andrus, questioned the closed session. Andrus could not be reached afterward, but an aide said Andrus partially based his decision to oppose the Carr plan on the belief that "he didn't want an adverse effect to come as a result of the executive session."

The PADC members who voted against the Danzansky proposal were Andrus, Nadine Winter, James Gibson, Roland Cook, Mitchell Kafarski, Nathaniel Owings, Yvonne Perry and Ray Nixon.

Danzansky said his worry that a legal challenge by Carr could delay the Willard restoration - scheduled to begin in January 1980-prompted him to begin the private talks with Carr. He said Carr also has met with Golding, who won the Willard bid, but that the two developers were not able to reach a compromise.

Golding is working in conjunction with the San Francisco-based Fairmont Hotels and Carr had formed a partnership with a hotel subsidiary of Pan American World Airways.

The proposal worked out between Danzansky and Carr was presented to the PADC board as a resolution warning that Carr "is prepared to institute a suit against the corporation," but has indicated a willingness to forgo legal action in consideration of exchanging" the property next to the Willard "for a portion of the Corporation's Kann's property. . ."

Said Danzansky: "I did recognize that there were some morally persuasive issues in favor of us making this swap but the board did not agree."

Asked what the moral issues were, Danzansky said, "Just the fact that he [Carr] owned some protion of the property as a certain point in time . . . and that he was extraordinarily cooperative in determining the historical value of the Willard. He had his foot in the door longer than any other developer."

Asked whether he had made the negotiating ffort because of his friendship with Carr, Danzansky said, "I was not an advocate of Mr. Carr's. We've had many disagreements on this issue. I do respect him as a developer. I also respect him personally. I think he's paid his dues to the community."

One board member who asked not to be identified said the property-swapping proposal represented a "dual standard," an accommodation to Carr that would not likely have been made to other developers.

Responded Danzansky: "I'm sure that was taken into consideration of the board when they refused the resolution . . . Still, I thought it was a Solomon-like settlement."

Danzansky said the PADC will have the Carr and Roosevelt property appraised and attempt to negotiate a purchase price.

If those talks fail, the PADC will turn the matter over to the Justice Department, which is charged with instituting condemnation proceedings that would pay Carr a court-determined fair market value for the property.

"I'm just praying that they (Carr and his lawyers) decide not to file suit," Danzansky said. "If they do, we'll just have to meet it."

Even if Carr sues, Danzansky said that the litigation might not slow plans for moving ahead with the Willard project. However, he acknowledged that a possible stumbling block would be if we were told to stop by a court injunction.

Said one person who attended yesterday's meeting, "We're hopeful that he doesn't play dog in the manager and hold up the Willard restoration." CAPTION: Map, no caption, By Dave Cook-The Washington Post