A Chevy Chase developer fighting for permission to build a condominium hotel on a prime piece of waterfront property in historic St. Michaels is planning to launch a "multifaceted" attack against the town's zoning appeals board for issuing a building permit last week that wiped out a compromise he had negotiated with the town commissioners.

Attempting to put to rest the case that has divided town residents and been snarled for months in legal and procedural problems, the St. Michaels town commissioners approved a contractual agreement with developer Gerald I. Goldberg last week allowing construction of a scaled-down hotel, in exchange for a promise from Goldberg that the building would be run as a hotel -- not an apartment building -- and that he would not pursue legal action against the town.

Several days later, however, the St. Michaels Board of Appeals, a separate body, issued a building permit that even further reduced the size of the hotel. The board said it was only following instructions laid out by Circuit Court Judge J. Owen Wise in a ruling issued last month.

"He told us to use only the information gathered at the public hearing last summer and the original application," said appeals board chairman James Slay. "And that meant we couldn't take into consideration the compromise the town had reached."

Harry M. Walsh Jr., Goldberg's lawyer, said that while it would be premature to disclose his plans to fight the appeals board at this time, he was working on several fronts and probably would have a clear plan by next week.

Goldberg's orginial proposal, submitted to the town last spring, was to build a 50-unit condominium hotel with a 40-seat restaurant. Condo hotels are hotels in which individuals own a specific unit and derive tax benefits and rental income from the unit.

Town residents protested the proposed hotel at a public hearing last summer, complaining that because each unit was designed as a full apartment unit with at least two bedrooms and a kitchen, the hotel would actually have over 100 rooms. Residents also said they were wary of the condominium form of ownership, questioning whether the owners could convert the hotel to an apartment condo if the hotel was not successful.

As a result of the protest, the appeals board revoked a building permit already issued to Goldberg, on the grounds that the hotel did not meet the town's zoning ordinance.

Goldberg filed a series of suits against the town last fall, contesting the appeals board's action; and in a decision handed down last month, Judge Wise told the appeals board to issue Goldberg a building permit within 30 days. While Wise said the board it did not have the authority to reject the project out-of-hand, he did say the board could require Goldberg to alter the hotel so that it conformed with the town's zoning code.

According to the compromise with the town, Goldberg would have been allowed to build a hotel with 57 rooms, down from his request for 104. The compromise also eliminated kitchens from the units but doubled the size of the restaurant. In working out the agreement, the town commissioners had not imposed new zoning restrictions on the project.

The building permit approved by the appeals board, however, did impose the new zoning restrictions. It would allow only 45 sleeping rooms and a 40-seat restaurant, and would limit the building to 2 1/2 stories.