Michael Laidler, 51, will never be able to return to work again after suffering severe mental problems following the incident at New College, County Durham. Mr Laidler had returned to the college to find his belongings and years of work under a pile of rubble.
He took legal action against the college claiming he had been "victimised" by bosses after refusing to sign a new contract.
But during a five-day court hearing, Mr Laidler said the "victimisation" occurred because certain members of staff had formed adverse views about his competence and were favouring a colleague.
Former police detective Mr Laidler had taught psychology to A-level students and degree criminology students for 14 years and was the institution's course leader. He told the court that he had been undermined by college chiefs and, following time on holiday and sick leave, returned to work to find his office had been destroyed.
While on leave in September 1995 he was sent a letter by the college warning that maintenance work was about to take place, and unless he minded his belongings being removed by workmen, he should collect them himself. When he reurned to work for an administration week on September 4 he was again reminded by colleagues and caretakers that the building would be demolished the following week.
Since the bulldozing, Mr Laidler's health has deteriorated dramatically and he even contemplated taking his own life. He had been claiming pound;350,000 damages and loss of earnings for personal injury resulting from negligence and breach of contract. But Judge Christopher Walton said: "It is clear Mr Laidler holds, and has held for a considerable time, the view that he was the victim of a concerted action by certain individuals at the college as a result of his failure to sign the new contract." He added: "If anything has emerged from this case, it is that the view he did form on the information available to him was a profoundly mistaken one."
Judge Walton ruled that there had been no breach of duty and ordered Mr Laidler to pay the defence costs.
And after the hearing Mr Laidler said: "I have been destroyed at work, my health has been destroyed and now I face financial ruin."
John Widdowson, the college principal, said: "The events involving Mr Laidler took place over five years ago at a time of great change for the college and the further education sector. Mr Laidler's illness occurred against that background."