The Maryland Court of Appeals has ordered a retrial of the malpractice case won two years ago by Helena Blanchfield, the Laurel woman who was wrongly diagnosed as a terminal cancer patient in 1976.

The state's highest court Tuesday threw out the $400,000 award Blanchfield was granted after the trial and ordered that a jury redetermine the amount of damages in a new trial. The appeals court ruled that the original jury should have been told that such damage awards are tax exempt.

The 49-year-old Blanchfield, who learned of the ruling yesterday, said a new trial would "force me to relive this all over again. As I put my memory back to what happened, I cry all over again." But she added, "I have never run from anything in my life, and I am not running from this."

Blanchfield's medical nightmare began on March 23, 1976, when Dr. Lewis H. Dennis told her she had multiple myeloma. Blanchfield said he told her this was cancer of the bone marrow and that she had from a month to a year left to live. There followed chemotherapy treatment that made her sick, weak and disoriented, 20 days in a hospital filled with dying cancer patients and the ordeal of planning her own funeral.

Her reprieve from a death sentence came six months after Dennis' diagnosis, when she traveled to the Memorial Sloan-Kettering Cancer Center in New York City, and took additional tests. There she was told she had never had cancer.

The ordeal did not end there. She already had quit her job, remortgaged her house to pay her bills and told the man she loved she never wanted to see him again. She had become obsessed with the disease, and says that to this day she still dreams of having cancer.

After a malpractice trial that opened two years ago today, a jury awarded Blanchfield $800,000 in damages. A Prince George's County Circuit Court judge cut the award to $400,000, and then Dennis' lawyer appealed.

This week, the state's highest court ruled that juries in damage cases must be instructed that the awards are not subject to U.S. or state taxes. Judge J. Dudley Digges wrote for the court that this "is simply to dissuade juries from improperly inflating an award because of a misconception that the taxing arm of government will extract a portion" of the amount.

Marvin Ellin, Blanchfield's lawyer, said the new trial will not be on the question of whether Dennis is liable for damages, but only on the amount of the award. Still, Ellin again will have to present much of his evidence, including Blanchfield's testimony, and any outcome is possible. "She could get less than $400,000, or she could get more," he said.

Ellin said he would move for a speedy retrial. Attorney John H. Mudd, who handled the appeal for Dennis, said he had no comment on what his next action would be.

Blanchfield, a strict Catholic who has found solace in her faith, said she believes that everything that has happened to her, including the order for a retrial, has happened for some purpose. "I think God does everything for a reason," she said yesterday.