Stonington - The town is facing a federal lawsuit that could cost it in excess of $750,000 in connection with an incident in which former Zoning Enforcement Officer Joe Larkin told a resident she could build a home on Lords Point but then reversed his decision after she had purchased the property.

Carol Holt of Fullerton, Calif., sued the town and Larkin, alleging their actions has resulted in a condemnation of her property and destruction of its value. She is seeking damages in excess of $750,000 along with payment of her attorney's fees.

"The Town of Stonington has engaged in a continuous course of action with the specific intention of preventing (Holt) from being able to make use of the vacant property," the lawsuit, filed last week, reads.

The town's insurance company has already spent $200,000 or more in a thus-far-unsuccessful attempt to defend the town against a different lawsuit that Holt had filed.

Last fall, a U.S. District Court judge ruled that the town cannot stop Holt from building a guest house on the lot as long as she meets other zoning requirements. The town has filed a notice that it is appealing that ruling. In that decision, the judge said Holt was not entitled to any damages or payment of her legal fees.

The judge also stated in her decision that the lot is now worth $40,000 because it is classified as unbuildable, and the town has decreased its assessment.

The case stems from letters Larkin sent to the lot's previous owners in 2003 and 2005 that said the parcel at the intersection of Boulder and Hampton avenues was a "lot of record" and could be built on if zoning requirements he listed were met. Former Water Pollution Control Authority Director Harold Storrs also said the property was a valid building lot, and the town was taxing the lot as a buildable lot.

In May 2005, three months after Larkin's second letter, Holt purchased the lot for $140,000 so she could build a guest house. Holt said she based her decision to buy the property on Larkin's assurance that she could build a house on it. That same day, she and her husband, Thompson Wyper, bought an adjacent home at 57 Boulder Ave.

When Holt sought a permit for the guest house later in 2005, she learned Larkin did not plan to approve it. In 2008, Larkin finally sent her a letter saying he had revoked his 2005 opinion based on new information he unearthed in November 2005 about how the lot had been altered in the past. He said that information now made the lot unbuildable.

Holt's suit alleges that various neighbors who stood to lose ocean views if the home was built - such as William Hescock and James and Thomasine O'Boyle, the latter of whom headed the Zoning Board of Appeals at the time - influenced town officials and the ZBA to overturn Larkin's decisions.

"The Town of Stonington has a lengthy and consistent pattern of denying property rights and impinging on the civil rights of its residents where it benefits town insiders, such as current or former members of the ZBA," the lawsuit alleges.

The town's insurance carrier, the Connecticut Interlocal Risk Management Agency, is paying the legal fees.

Holt and her family now live in California and spend summers on Lords Point. First Selectman Ed Haberek declined to comment on the suit. The CIRMA attorney handling the case could not be reached for comment.

J.WOJTAS@THEDAY.COM