Brothers Theodore N. and Lawrence E. Lerner, multimillionaire developers already embroiled in a $56 million lawsuit arising from bitter sibling rivalry, squared off yesterday in Montgomery County Circuit Court over an alleged corporate "squeeze-out" Lawrence Lerner contends will strip him of his 26 percent ownership in the family's management company.

Last Monday, at the urging of Judge Irma Raker, lawyers for the embattled brothers reached what the attorneys called a "gentlemen's agreement" to postpone a special meeting of Lerner Corp. directors. The meeting had been called to amend corporate articles in order to enable Chevy Chase shopping center magnate Theodore N. Lerner, his wife and son to buy out Lawrence, Theodore's younger brother.

Yesterday, the lawyers and the Lerners were back in court, this time before Judge William Cave. At the close of yesterday's day-long hearing, Cave refused Theodore Lerner's request to dismiss his brother's motion to stop the contemplated stock transaction.

Lawrence Lerner, who smiled often as the lawyers argued, sat flanked by his supporters on one side of the courtroom while Theodore, his wife Annette and son Mark sat poker-faced on the opposite side. The brothers did not exchange glances and both declined through their lawyers to comment on the family and legal feud.

The eight lawyers and their assistants far outnumbered the plaintiff, defendants, spectators and reporters in Cave's courtroom yesterday. As Cave took his seat on the bench, he smiled and joked to the bevy of attorneys, "Would the bar association care to identify itself for the record?"

The Lerner brothers are formidably represented: Lawrence Lerner's lead attorney, Arnold M. Weiner, represented former Maryland governor Marvin Mandel in his political corruption trial and Jacob Stein, Theodore Lerner's attorney, led the recent federal investigation of Attorney General Edwin Meese III.

Last month Lawrence Lerner, 52, filed suit alleging that his 59-year-old brother defrauded him of tens of millions of dollars, which he said represented his share of the proceeds of several business ventures.

The family business, of which Theodore owns 70 percent, has built thousands of apartments and offices in the metropolitan area and has developed many of its major shopping centers, including White Flint, Wheaton Plaza, Landover Mall and Tysons Corner.

Lawrence Lerner's suit, filed April 8, seeks $56 million in compensatory and punitive damages and dissolution of the 20-year-old family business.

But yesterday, lawyers for Theodore Lerner told Cave his plan to buy out Lawrence Lerner's share of the company is an effort to stem his brother's attempt to dissolve the company. Weiner, an attorney for the younger Lerner, responded that he would amend the lawsuit to drop the dissolution request.

Cave repeatedly chastised lawyers yesterday for arguing aspects of the $56 million civil suit in a hearing called to address the injunction against the reverse stock split, which, according to Weiner is "a blatant act of retaliation" against Lawrence Lerner.

Testimony is scheduled to continue today before Cave.