ANNAPOLIS, JAN. 15 -- Kanasco Limited, the Anne Arundel County drug firm suspected of causing a large toxic chemical leak on Monday, has repeatedly polluted a nearby stream with methylene chloride and other chemicals, despite three state orders to cease, according to a 1986 lawsuit filed by state officials.

Seven persons were hospitalized Monday after methylene chloride fumes wafted into their houses in north Anne Arundel, and state officials evacuated 26 houses. The county utilities department then ordered the pharmaceutical company shut off from public sewers on Wednesday, after saying officials found several hundred times the legal limit of methylene chloride in Kanasco's sewer outlet.

Kanasco attorney Jerald J. Oppel said earlier this week that he thought it unlikely that the fumes came from Kanasco. The firm has also denied the pollution charges leveled by the state Department of Health and Mental Hygiene in its lawsuit.

The civil suit filed in Circuit Court alleges that Kanasco repeatedly polluted a tributary of Cabin Branch Creek stream with phenols, alcohol, acetone, methylene chloride and several other chemicals. The suit maintains that the state has issued orders since 1982 to stop polluting and fined Kanasco $7,000 in 1983, but that the pollution continued.

County Utilities Director Thomas Neel said Thursday he is convinced the chemicals found in the outlet leaked from Kanasco. Neel and state Department of the Environment spokesman Ray Feldmann said inspectors do not know of any other possible source of the fumes found in houses on Monday, but they said they are still looking.

The state lawsuit is one of three pending in Anne Arundel County Circuit Court accusing Kanasco, a small company that makes penicillin, of illegally dumping toxic chemicals. Kanasco denies the allegations in each case, according to court documents.

In a separate pending suit, which has been combined with a similar suit filed by another neighbor, a family living downstream from Kanasco says it has been repeatedly exposed to chemical fumes from the company, been forced to leave home several times and been hospitalized. Deborah and James Mullen, and their son James Mullen III, also contend in the suit that they have "a reasonable apprehension . . . of injury to their life, safety and health in the future." The Mullens were among those hospitalized on Monday.

In a separate dispute involving Kanasco, the U.S. Food and Drug Administration last summer revoked the company's license to manufacture and distribute injectable drugs, claiming it had produced drugs illegally, falsified records and violated safe drug manufacturing standards. The company is contesting the action and denies wrongdoing.

In the official record of the FDA proceedings against Kanasco published in the Federal Register last Aug. 6, three FDA inspectors were quoted as describing Kanasco as one of the most serious and extensive violators of drug manufacturing regulations they had encountered.

Kanasco attorney Oppel could not be reached for comment today on the FDA proceedings. However, according to the FDA records, Kanasco lawyers argued that FDA's actions were vindictive, that some of FDA complaints were incorrect, that significant improvements in drug-producing standards had been made, and that different inspectors had different complaints that made it difficult for Kanasco to address the FDA's complaints.