UPDATE 1-Investor Steinhardt loses case over George Washington portrait sale

(Adds comment from Steinhardt in paragraph 9)

By Herbert Lash

NEW YORK, July 27 (Reuters) - Michael Steinhardt, a former hedge fund titan on Wall Street, lost a lawsuit he filed against an art gallery and its president for allegedly making an "unfair secret profit" from the $12 million sale on consignment of a portrait of George Washington.

Justice Joel Cohen of New York Supreme Court on Monday dismissed the case that was brought against Manhattan-based Hirschl & Adler Galleries and its president, Stuart Feld, for breach of fiduciary duties.

Steinhardt is a sophisticated investor who did not deny that he understood the consignment's terms said it would sell for $10 million "net to you," Cohen said. Nor did he claim the gallery breached the consignment contract, he said.

"The meaning - and enforceability - of the phrase 'net to you' is the crux of the dispute," Cohen wrote in his order to dismiss.

Steinhardt claimed the gallery failed to disclose the market value of the portrait of the first U.S. president painted circa 1800 by Gilbert Charles Stuart and misled him to believe it would be difficult to sell, according to the order.

Steinhardt, who bought the portrait in 2006 for $5 million, alleged he did not know the financial consequences of "net to you" in this transaction because he was not told what the ultimate sales price would be, the order said.

If Steinhardt, who also claimed the gallery engaged in fraud, unjust enrichment and deceptive business practices, wished to condition the "net to you" arrangement, he could have negotiated that, but did not, Cohen said.

Steinhardt, a trader, ran a hedge fund that averaged annualized returns of about 25% for almost three decades before he closed the fund in 1995.

"I lost this and life goes on," Steinhardt said when reached by telephone. "It's not the worst thing in my life, but it's annoying."

Calls to Hirschl & Adler seeking comment were not returned. (Reporting by Herbert Lash; Editing by Marguerita Choy)