An Industrial Tribunal has dismissed Dorothy Jones' claim that she was unfairly dismissed from Comberbach County Primary School - where she was head for 15 years before becoming embroiled in a job wrangle.
Mrs Jones plans to appeal against the ruling.
The tribunal's printed decision said: "This is a sad case, including, as it does, the element of ill health of a serious kind.
"Mrs Jones entertains very strong views in regard to the way she perceives she was treated by the county council.
"Equally, it seems apparent that the staff would not have complained in the way that they did, without at least some basis for that complaint.
"The governors of the school then became involved, as did the parents, and, indeed, the dissension spread into the wider community."
The tribunal, which sat at Liverpool earlier this year, had to decide if Mrs Jones was dismissed.
Its three members decided she wasn't.
They said she started the process of ill health retirement herself by applying to the Teachers' Pension Association for an infirmity benefit.
The tribunal also dismissed Mrs Jones' claims of:
Breach of contract
Alleged discrimination on health grounds
Alleged failure to give reasons for her dismissal.
A spokesman for Cheshire County Council welcomed the tribunal's ruling.
He said Mrs Jones was treated sympathetically by governors at Comberbach Primary and by senior members of Cheshire's education authority during a difficult period.
"Comberbach School and its governing body can now move forward positively for the benefit of staff and pupils at the school," he added.
But Jenni Watson, Dorothy Jones' legal representative, slammed the tribunal's decision.
"The judgement is that she was not dismissed, she resigned," she said.
"We contend that that decision is wrong in law.
"For that reason we are appealing.
"Mrs Jones handed in an ill-health retirement application to test the water.
"When it was accepted by Cheshire County Council they never wrote a letter to her saying that they took this to mean she had resigned.
"Naturally, Mrs Jones is very disappointed by the decision but that disappointment has been tempered by the forthcoming appeal."
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