I don't blame either the landowner or the guy being evicted for this. It sounds like their system would have continued until one of them died, if not for the state deciding to pursue its arbitrary building and zoning requirements, but now they're shoving liability back and forth for optics in court.

I'm not sure how this is supposed to end. Even if the verbal agreement existed, it's still the landowner's property and that permission could be revoked at any time. You're not actually legally required to let someone live on your property for free forever just because you said you would.

The only way this ends is with eviction one way or another.

The moral of the story is that you need to jump through the state's hoops even if you don't see the point.