A $12 million suit challenging the participation by Fairfax City police in a clandestine CIA break-in at a photo studio in 1971 was dismissed yesterday by a judge who said there was no evidence that the police conspired with CIA agents to conduct an illegal raid or that they libeled the store owners.

U.S. District Judge Albert V. Bryan Jr., who heard the case in Alexandria, said there was no evidence presented that the raid was conducted illegally. He added that "the good faith" of Fairfax City and the two former and one present city policemen who were defendants in the case "has been uncontradictedly established."

Orlando Nunez and Deborah Fitzgerald, who owned the now-defunct Roland photo studio at 10419 Main St., Fairfax City, had argued in their suit that their constitutional rights were violated by the break-in and that the CIA, aided by the Fairfax City police, libeled them and caused their business to fail following disclosure of the raid two years ago.

The three men - former city Police Chief Leonard P. Kline, retired Chief of Detectives Carl W. Burholt and Robert L. FlecK, who is still on the police force - testified on Tuesday that they assumed the CIA had a search warrant and that they themselves never entered the photo studio but were nearby in order to keep other local police from interfering.

The CIA conducted the raid Feb. 19, 1971, becaus it had information that Fitzgerald, a former CIA employee in the records department, looked at classified CIa files on Nunez, a Cuban national who once worked for Fidel Castro, Justice Department sources said last year.

Fitzgerald, who married Nunez in 1973 but is now getting a divorce, testified that she told Nunez about a three-page report on him and thought no harm was done because "what I disclosed to him he already knew." She said many CIA employees look at the files, especially those of celebrities and the files were "like the public library."

Nunez and Fitzgerald also claimed that the publicity generated by the publication in June, 1975, of the Rockefeller Commission report that mentioned the break-in, not only caused their business to fail, but also caused their marriage to dissolve. The city and police libeled them, they contended, because the raid made the public think they were Communists engaged in unamerican activities.

Judge Bryan said "the resulting publicity may have damaged (Nunez and Fitzgerald) and I'm perfectly willing to accept . . . that the resulting publicity did damage their business." But, he said, "the resulting publicity did not emanate from" the police or Fairfax City.

Nunez and Fitzgerald are suing the CIA separately, in U.S. District Court in Washington.