Dispute Resolution

The Fabrica Trust agreement establishes clear rules for resolving disputes. The framework uses existing court systems rather than creating new dispute mechanisms.

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Governing Law

The trust agreement is governed by California law. Section 12.3 provides that, "to the extent it is not contrary to a strong public policy of the jurisdiction, if any, having a more significant relationship to this Agreement, this Agreement, the rights and obligations of the parties hereto, and any claims and disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of California". It binds the parties to the agreement, including the beneficiary (token holder) and the trustee, and those who accept it (Sections 4.1 and 12.8); it does not purport to bind strangers to the trust.

Exception for real property matters: Conveyancing, recording and transfer of record title, the validity and priority of liens, and probate or succession proceedings affecting the property are governed by the mandatory laws of the jurisdiction where the property is located, to the extent those laws cannot be varied by agreement. Matters governed by UCC Article 12 follow the token's designated jurisdiction (California, Section 11.1). This is a practical necessity since real property law is inherently local.

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Jurisdiction

Disputes arising from the trust agreement can be brought in:

The California jurisdiction clause is non-exclusive, meaning parties are not limited to California courts when local property matters are involved.

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Common Dispute Scenarios

Competing Ownership Claims

If two parties both claim beneficial ownership of the same property (for example, after an unauthorized transfer), the dispute follows this priority:

1. UCC Article 12 protections: A transferee who obtains control of the token for value, in good faith, and without notice of competing claims may qualify as a "qualifying purchaser" and take free of adverse claims
2. Trust agreement provisions: The agreement distinguishes between authorized and unauthorized transfers (Section 7.5)
3. Court resolution: If the self-service mechanisms cannot resolve the dispute, a court of competent jurisdiction determines the rightful owner

Contested Token Recovery

If someone files a Notice of Lost Token Control and another party contests it during the Quiet Period, the self-service recovery process halts and the matter moves to the court order path (Section 10.4).

Lender Disputes

Disputes involving property tokens used as collateral are subject to both the trust agreement provisions and the terms of the lending protocol. See Lender Protections for the UCC framework governing secured transactions.

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No Merger of Interests

The trust agreement includes a specific provision (Section 12.5) to prevent the trust from failing due to "merger", a legal doctrine that could terminate a trust when the same person holds both legal and equitable title. Since Fabrica allows the beneficiary to also serve as trustee, this protection is important.

If a court determines that merger has occurred, the trust includes automatic provisions:

1. The trust does not terminate, and the beneficiary's role as trustee is automatically suspended (Section 12.6)
2. A temporary "Continuity Trustee", selected by the beneficiary (or, if the beneficiary does not designate one within 30 days, appointed by the court on a Beneficial Interest Holder's petition), serves to preserve the trust
3. The Continuity Trustee has no discretion over distributions and no authority to encumber the property, but holds the office subject to the affirmative trustee duties of Sections 8.1.2 and 8.1.4; the appointment ends on a valid transfer of the token, the beneficiary's appointment of a different trustee, or dissolution of the trust

This is designed to help the trust survive even edge-case legal challenges.

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Practical Considerations

• Self-service paths come first. The trust agreement's self-service mechanisms (token transfers, the recovery process, removing a property) are designed to handle uncontested situations without court involvement; contested ones go to court.
• The trust has never been tested in court. While the legal framework is designed to be robust, property owners should be aware that this is a new model of ownership. See the disclaimer on the Fabrica Trust page.
• Legal counsel is recommended for disputes. If you are involved in a dispute over a tokenized property, consult an attorney familiar with both real estate law and digital assets.