Is circular reasoning always a fallacy?

Consider the following dialogue: A: "I accept only one notion of land property. Namely, 'I am doing what I please here, therefore I have ownership here.’” B: "But this means you can break into any place and stay there, using this rule." A: "There is another rule, though; the right to act in a natural way; 'I have ownership here, therefore I have the right to do what I please here.’" B: "But do not these rules put together become circular reasoning?" A: "Of course they do. And this is exactly that rare case when circular reasoning is not only sufficient, but is necessary." B: "But why is that? Circular reasoning was never a correct argument." A: "There are many circular things happening in nature. Life forms, for example, exist only in order to produce new life forms or to prolongate their own lifetime. Is there any reason to say this can't be the case for reason itself? Why must reasoning not be circular?" Can circular reasoning ever be justified? For example, we know all the words in our languages can't be defined using other words without the use of circularity. We know logic can't prove itself without circularity. Are these arguments rational? Are there any other arguments where circular reasoning is still rational?