Nearly 200 people gathered yesterday on the grounds of the Washington Adventist Hospital in Takoma Park and watched as repeated blows from a wrecking crane began demolition of the adjoining 75-year-old sanitarium.

Hours earlier, Takoma Park's mayor and City Council announced that after five years of trying to save "the San," as residents affectionately called the old Washington Sanitarium, they would fight no more.

They gave up an injunction they had won Wednesday in Montgomery County Circuit Court that would have prevented hospital officials from demolishing the building. That injunction would have lasted only until another hearing, and the judge had required that the city post a $50,000 bond. The council members decided in an emergency session Wednesday night that the city could not afford to battle any longer.

Their decision ended legal maneuvers in which the city insisted the building was historic. The sanitarium was the first structure built by the Seventh-Day Adventists who settled Takoma Park. But hospital lawyers contended the building was unsafe and stood in the way of hospital expansion. By yesterday, the county Planning Board and County Council had agreed with the hospital.

Mayor Sammie A. Abbott deplored the outcome. "The decision that we made to no longer oppose the destruction is based on the financial well-being of the city," he said. "We are operating without a penny coming from institutions that are tax exempt," he added, referring to the hospital.

Council members repeatedly asserted that hospital officials had misled them in discussing long-term construction plans and had obtained loans with the city's help on the promise that the San would stand. They said they felt bitter that the hospital rejected plans to convert the structure into an office building.

Gerald M. Northam, a hospital vice president who stood listening to the council members' reactions, said only, "I would hope that the elected officials and community groups would be willing to look to the future."

The 4,500-pound ball began dropping shortly before 2 p.m., sending thunderous booms over the neighborhoods.

The crowd, mostly hospital employes, squealed with the kind of oohs and ahhs usually reserved for fireworks displays. "There used to be this kind of glee at the lynchings in the South," said Abbott, turning away.