A Maryland tax court has ruled that Montgomery County must pay $267,000 to Friendship Heights residents because the county failed to hold public hearings on the property tax rates from 1974 and 1977, according to lawyers involved in the case.

Christopher Malone, assistant county attorney, said the court's decision this month was a "poor one" and that the county plans to appeal it to the Montgomery County Circuit Court before the Aug. 2 deadline. Malone said the county was acting under law when it collected the tax and was "acting like an agent to the Friendship Heights government" and should not be liable.

Under Maryland law before 1978, jurisdictions that sought to charge rates exceeding 10 cents per $100 of assessable value were required to hold a public hearing on the property taxes, according to Friendship Heights Village Council attorney Edward Genn. Tax rates between 1974 and 1977 were 40 cents per $100 of assessable value.

Before 1978, property taxes for Friendship Heights, which has 6,000 residents, had to be approved and levied by the County Council at the suggestion of the Village Council.

Malone said that while the county approved and collected the taxes, the money was redistributed to the Friendship Heights government, and therefore the county should not be required to repay the money.

Genn said that the taxes were "reasonable" and that although the county failed to hold public hearings, the Village Council did hold such sessions. He said that several members of the council that originally set the rates in 1971 were among those who later filed the complaint.

He said the case is one of a "possible misinterpretation of the law by the county . . . and that they refused to admit they may have made a mistake." Spokesmen for residents bringing the suit could not be found yesterday.

The suit was filed last year by property owners in Friendship Heights against the county. The county subsequently requested that the Friendship Heights Village Council also be named as a defendant in the suit. Originally, the tax court agreed, but the ruling this month did not hold the city liable for any of the funds to be repaid, according to Malone.

"I am quite surprised that the court reversed itself and said that the county was liable. They've got the money, and I'm flabbergasted," Malone said.

Malone said that he thinks it is unfair that Montgomery County is being forced to repay the money because the residents of Friendship Heights, a municipality just north of the District line, were the sole beneficiaries.