The small shrine located in a place near the mountains on the edge of town had been washed away by a landslide.
I can't decide how to parse the part in bold. I can see two ways:
For 1) I'm translating as "Shrine located in a place which is near to the mountains." i.e the place is near the mountains but not in the mountains.
For 2) I'm translating as "Shrine which is located in a nearby place, and is located in the mountains." i.e. the nearby place is in the mountains.
Is the sentence ambiguous or is one of these obviously wrong? And why?
I'm guessing at option 1) since I'm not sure you can have the structure AにBにある. But I think many shrines are located in the mountains so 2) seems possible.