The owner of a Montgomery County towing company, who claims he had a contract to haul cars for the Takoma Park Police Department, is suing the city for $700,000 for what he says are unpaid fees.

Bill Brown, the president of Silver Spring Towing and Storage Inc., said in an interview yesterday that he made an oral agreement with the police department in 1980 to allow his lot to be used to store cars that the police had seized or towed away for parking violations.

Brown's suit, filed in Montgomery County Circuit Court, alleges that the city has not paid him for either towing or storage of cars, some of which it said have been sitting on his lot for three years.

Takoma Park Mayor Steve DelGiudice refused to comment on the details of the suit.

He said the city has stopped doing business with Brown's company, located on Brookeville Road in Silver Spring, and is working out an agreement with another company.

Under the agreement he had with the police, Brown said, the department would call him first on all towing assignments.

In return, he said, he agreed to store the cars on his lot for $5, half the normal daily rate charged to other customers.

"In the beginning it was good for both sides," said Brown, whose lot has space for 140 cars.

"I needed the business and they needed the towing. I never thought that the City of Takoma Park wasn't going to repay me," he said.

Takoma Park, like many small municipalities, has no towing equipment or impoundment lots and uses private towing companies.

A city official familiar with the suit who did not want to be identified said it was unusual for a towing company to collect fees directly from the police department. Normally, the official said, "the towing company will make their money [by collecting fines directly] from the car owners, not from the city."

Brown said yesterday that under the unwritten agreement with the Takoma Park police, motorists whose cars were impounded for parking or other violations could reclaim their vehicles from his lot after they paid their fines and the additional costs of storage and towing charges.

Vehicles unclaimed or forfeited by their owners were sold at police department auctions on Brown's lot, he said.

The proceeds from the auctions were used to pay Brown's fees.

Brown said that after the last auction, in 1983, when 100 vehicles were sold, the city refused to pay him, broke off the agreement to use his company exclusively and began calling another firm for towing jobs.

"They notified me that they no longer needed my services," Brown said.