When I run into stuff like this I can only think that an immutable decentralised ledger of some form that publicly holds the truth of things would be so much better. All land should be on some blockchain breaking down the exact coordinates of the land. Actually, I know someone who was working on this years ago.
There's no reason people can't trade their well defined property easily.
"Code as law" falls over pretty quickly in such cases as there is often a need for human intervention. This is a big problem I have with the grandiose claims of Eth. It definitely has a niche but will never be as widely applicable as they hope.
Had they used the same Oracle Database which was publicly transparent and reliable then Bob would not be having any issues.
The problem, in this case, is that the property definition changed without any paper trail of why or when it changed.
Here in Panama owning property is very difficult because someone can own a property but then someone else comes forward with some paper from 1920 saying their great grandfather owned that property, and they can gain control of the property. The problem being that there was no standard system of proving ownership. My friend used to go up and down the Caribbean cost with a six pack of beer and a stack of cash and when he found a property he liked he would ask the locals to find him the owner. He'd offer them the six pack and wad of cash and have them put their thumb print on a document giving him ownership.