The D.C. Court of Appeals yesterday overturned a lower judge's 1978 order calling for wide-ranging reforms at the city's two long-troubled juvenile institutions.

In a 2-to-1 decision, the appellate panel ruled that Superior Court Judge Gladys Kessler lacked the authority to order sweeping changes in the internal operations of Cedar Knoll and Oak Hill, the two city-run juvenile facilities in Laurel known jointly as the Children's Center.

Kessler had issued her detailed order after conducting a seven-month investigation prompted by allegations from four juveniles of sexual attacks, physical beatings and narcotics distribution at the institutions.

Appellate Judge Catherine B. Kelly, writing for herself and Chief Judge Theodore R. Newman, acknowledged that "the picture painted by these four juveniles was disturbing enough to shock even the most apathetic among our citizenry."

But she and Newman ruled that the case was legally "moot" because the four juveniles no longer were at the institution when Kessler issued her order.

Judge John M. Ferren, who dissented from the ruling, charged that the court majority was using a legal technicality to "duck the hard question of what to do about Cedar Knoll."

"We're disappointed with the decision," said W. Anthony Fitch, deputy director of the Public Defender Service, which represented the juveniles. "The allegations of abuse and mistreatment have never been refuted or even denied by the District, and [the youths] face the very real possibility of being returned to the same unacceptable conditions."

City officials yesterday defended the appellate court's opinion, but said steps have been taken to change conditions at the two juvenile facilities.

"The city never took the position that there wasn't need for improvement," said D.C. Corporation Counsel Judith W. Rogers, " and indeed, [the city] did things to improve."

Deputy Corporation Counsel Geoffrey A. Alprin, who heads the division that handles juvenile cases, said city officials "understood [Judge Kessler's] concern."

He said that despite budgetary constraints, the Department of Human Services -- the agency that operates the two facilities -- has implemented "at least 75 percent of the specific provisions in Judge Kessler's order."

Alprin said the city has instituted such reforms as creating a confidential complaint procedure for youths to report alleged abuse, improved services for emotionally disturbed youths, imposed restrictions on the administering of drugs, and soon will start a counselor training program.

The two facilities that make up the Children's Center house about 275 youths. Oak Hill is a more secure facility than Cedar Knoll.

"Without a doubt," Kelly wrote in yesterday's opinion, "the terms of Judge Kessler's order come very close to creating a situation where administration of the Children's Center is in the hands of the judicial branch . . . The complaint of one or two, or even four juveniles, does not give the court license to undertake a broad and detailed inquiry into the operation of the entire facility.

". . .The Superior Court does not administer the Children's Center," Kelly said.

Kelly said the case should be dismissed as moot because the four juveniles who made the allegations of mistreatment were not in the center's custody on Aug. 7, 1978, when Kessler issued her order.

Criminal charges against two of the youths were dismissed early in 1978, a third was placed in his mother's custody, and the fourth had escaped from Cedar Knoll.

The city appealed Kesler's order to the Appeals Court, and was not required to implement the reforms pending a decision from the appellate court. Yesterday's ruling came almost 18 months after the case originally was argued on Nov. 30, 1979.

Attorney Wallace J. Mlyniec, director of Georgetown Law Center's juvenile justice clinic, also criticized the court's ruling. He cited Ferren's dissent, which noted that two of the four youths -- the one who absconded and the one in his mother's custody -- still were under court jurisdiction when Kessler ruled and therefore the case was not moot. Ferren said he would have sent the case back to Kessler for further hearings. f