A federal appeals court has ruled in favor of the D.C. government and community activists in a longstanding dispute over a developer's plans for Cathedral Mansions South, a historic apartment property across the street from the National Zoo.

The owners of the apartment building, designed in the 1920s by prominent D.C. architect Harry Wardman, wanted to put eight town houses on adjacent landscaped lawns. They were thwarted when D.C. officials ruled that doing so would interfere with the area's historic character. The owners responded with a lawsuit, saying they deserved compensation because much of their property was rendered "valueless."

U.S. District Judge Louis F. Oberdorfer rejected the claim by the owners, District Intown Properties Limited Partnership. Now the D.C. Circuit Court of Appeals has weighed in, agreeing that officials acted properly and that no compensation is due.

At issue was whether the D.C. action was a "taking" of property under a constitutional provision that prohibits the government from "taking private property . . . for public use without just compensation." Had the appellate judges ruled it was a taking, District Intown would have been entitled to payment. But the judges ruled otherwise, largely because the apartment building remains a vibrant enterprise.

Historic preservationists hailed the court's ruling.

"This case was very important because it upholds the local government's authority to designate historic buildings and districts," said John D. Echeverria, an attorney for the National Trust for Historic Preservation and D.C. Preservation League.

Cathedral Mansions South is part of a swath of Connecticut Avenue NW, extending between the Dupont Circle area and beyond Cleveland Park, that carries historic designations. Wardman also designed the landscaping that put the building in a park-like setting.

District Intown bought the site in 1961 as a single parcel and treated it that way for 27 years. But in 1988, the owners subdivided the land into nine lots, and later announced plans to build eight three-story town houses on half of the lawns.

Even before the property was subdivided, activists in Woodley Park sought to have the site designated as a historic landmark. The District's Historic Preservation Review Board approved the landmark designation in 1989. The District subsequently rejected the town house proposal, acting on recommendations from the federal Commission of Fine Arts, the director of the National Zoo, the D.C. Historic Preservation Review Board and local community associations. That started the years of litigation.

Lawyers for District Intown contended the D.C. government's action prevented them from using eight of their nine lots. The D.C. government countered that the property should continue to be viewed as one parcel, with apartments and landscaping.

The appellate panel agreed with the D.C. government, saying that District Intown remains able to generate money from the apartments as it has for 38 years.

"This is a good decision for the District of Columbia," said D.C. Corporation Counsel Robert R. Rigsby, whose office argued the matter. "The decision will strengthen the District's ability to protect and preserve historic architectural monuments in their intended settings without fear that their significant attributes will be nibbled away."

Wallace A. Christensen, an attorney for District Intown, said he was disappointed with the ruling but had not decided whether to seek further review.

In their decision, released Friday, Chief Judge Harry T. Edwards and Judge Judith W. Rogers strictly interpreted the takings clause. Although Judge Stephen F. Williams agreed, he wrote a separate opinion with a barb at the activists.

"A cynic might suspect that the alleged relationship between the lawn and the Cathedral Mansions apartments is little more than a cloak by which the citizens of Upper Northwest Washington have secured some parkland on the cheap," Williams wrote.