When a federal agency offered in 1972 to help Beatrice Melton remodel the old home containing rental units she owned in Washington, she decided to accept because she was convinced that someday it would generate rental income to supplement her modest earnings.

But the project never worked out that way. First, the $40,600 loan the agency helped her obtain was spent without work ever being completed. Then agency's on-site supervisor pleaded guilty to taking a bribe from one of the contractors involved. And, finally, work was abandoned and the half-finished housed gutted by vandals.

This week Melton's long battle for relief was rewarded when U.S. District Court Judge Harold H. Greene ordered the federal government to pay Melton $121,411 in damages to help her repay her debts and begin remodeling anew.

Greene, in making the award in the unusual suit brought by Melton, called the ordeal a "depressing saga of confusion and inefficiency" and said it began when the government offered her a loan and then selected "contractors who were incompetent, corrupt or both" to carry out the job.

Melton's house, at 1812 Ninth St. NW, in the Shaw urban renewal area, was once the home of Mary McLeod Bethune, a black educator and leader and director of the National Youth Administration, Greene said.

Melton, who described herself as "a poor working girl" and lives in New York, had been given the house by her father, Greene said.

In 1972, after the District government warned Melton that the house had 98 housing code violations, she was contacted by the Redevelopment Land Agency, then an arm of the federal government, and told that she was eligible for a loan to remodel and make repairs. With RLA's help, Melton received a $40,600 loan.

The renovation project was announced with considerable fanfare because of its link to Bethune and because it was one of RLA's largest projects, Green said. The project, however, turned into what Greene described as a "debacle."

The RLA, which had control over selection of contractors for the project, chose two firms that did not have the experience or licenses necessary to do home improvements, Greene said. The RLA rehabilitation specialist assigned to the job eventually pleaded guility in federal court to taking a $2,000 bribe in connection with the project, Greene said. Meanwhile, Melton was falsely assured that the work on her house was moving on schedule and was carefully monitored, Greene said.

When problems came up, Greene wrote, Melton was assured that they were "technicalities peculiar to the way of doing business in the District of Columbia." Greene found, however, that the federal government had failed to properly supervise the employes assigned to the project.

In 1975, when Melton's loan was exhausted but the project still incomplete, the U.S. Department of Housing and Urban Development "adamantly refused" an RLA request for a $17,000 grant to save the project.

Work stopped, Greene said, and vandals moved in on Melton's house. Then, "to add insult to injury," the District government charged Melton $1,145 for the cost of barricading the building and hauling away trash and debris. Melton first filled an administrative claim against the United States for about $90,000, which was denied, then brought her case against the government to the federal court.

The money judgement against the government includes the cost of completion of the renovation project, six years worth of lost profits on the rental units in the house, reimbursement for the city fine and interest on the original loan obtained with RLA's help.