The Vienna Town Council last week turned down a proposed out-of-court settlement with the owners of the Marco Polo restaurant, who have fought the city for five years in an attempt to get commercial zoning for residentially zoned land behind the restaurant.

The case, which goes to court June 28, is seen as a test of the town's long-standing policy of allowing commercial development along only two corridors, Maple Avenue (Rte. 123) and a short stretch of Church Street. Vienna has not rezoned any of its residential neighborhoods for commerical purposes in more than 30 years.

The case also will test the town's historic district ordinance because the acre of land Marco Polo wants rezoned is part of the Windover Heights Historic District, created in 1979.

Marco Polo's owners bought the land in 1977. They told the town Planning Commission in 1980 they needed additional parking space for the restaurant, 245 W. Maple Ave. They said they planned to demolish the one house standing on the land.

The latest restaurant plans call for a town house-office complex behind the restaurant. The owners claim the city has arbitrarily denied them the rezoning. They also claim the historic district is illegal, town spokeswoman Marie Kisner said, and are asking for $300,000 in damages in addition to the rezoning.