No. 81-240 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1982 

STATE EX REL. , ROBERT H. WILSON, 

Relator and Appellant, 

DEPARTMENT OF NATURAL RESOURCES AND 

CONSERVATION OF THE STATE OF MONTANA, 

Water Resources Division, 

Respondent and Appellant, 

WILLIAM B. V7ALTON AND MARION WALTON, 

Intervenors and Respondents. 

Appeal from: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, The Honorable 

James B. Wheelis, Judge presiding. 

Counsel of Record: 

For Appellant: 

Books & Budewitz, Townsend, Montana 

Patrick F. Hooks argued, Townsend, Montana 

For Respondents: 

Josephson & Fredricks, Big Timber, Montana 

Conrad B. Fredricks argued, Big Timber, Montana 

Submitted: JuL 14 1982 

Decided: July 14, 1982 

Filed: 
Mr. Justice Fred J. Weber delivered the Opinion of the 

Court. 

This appeal arises from the District Court's granting 

attorney's fees to Intervenors following a hearing to determine water rights, in the Thirteenth Judicial District, 

Yellowstone County. We reverse the District Court. 

The sole issue on appeal is whether Intervenors (~altons) 

are entitled to attorney's fees from Relator (Wilson). 

Wilson and Waltons owned adjacent property in Yellowstone 

County. Waltons purchased their property in 1963, and in 

1966 built a structure to impound water from an unnamed 

tributary (coulee) of Dry Creek to use as a stock water 

reservoir. They continued this use each year after their 

dam was built. In 1970 Wilson purchased land just up the 

coulee from the Walton land. In 1975, Wilson built a road 

across the coulee, cutting off virtually all of the flow to 

the Walton reservoir, and creating his own stock water 

reservoir. He knew of the Walton dam at the time. He did 

not apply for a beneficial water use permit from the Department 

of Natural Resources and Conservation (DNRC), as required by 

the Montana Water Use Act of 1973, 589-880(2), R.C.M. 1947 

(now sec. 85-2-302, MCA). Waltons' protests to Wilson and 

Wilson's lawyer, that the roadway blocked off the water they 

depended on to water their stock, were unavailing. 

In fall of 1976, Waltons protested Wilson's actions to 

the DNRC. A subsequent on-site inspection by the DNRC 

resulted in their informing Wilson he was in violation of 

the Montana Water Use Act and must obtain a beneficial use 

permit before appropriating water from the coulee, or he 

would be subject to misdemeanor charges. Wilson applied for 

such a permit in February of 1977; the application was 
noticed by publication. In May of 1977, Waltons filed 

timely objections to issuance of the permit and in October 

of 1977, filed timely amended objections. 

On December 21, 1977, the DNRC, in an attempt to informally 

settle the dispute, sent the following letter: 

"Dear Mr. Wilson: 

"This is in reference to your Application 

No. 11761-s43Q and the objection of William 

and Marion Walton. A review of the application and objection shows that the watershed 

above the objectors' dam will yield approximately 15-20 acre-feet of water on an average 

year. This will vary from year to year. The 

objector claims a prior water right for approximately 8 acre-feet for stock watering, 

which indicates the availability of appropriable water. It appears they have a valid --- 

- use right -- to themaximum amount --- of water he 

---- has put to a beneficial use prior to July 1, 

- 1973, as our -- records -- show no filedp-- 

"Under ---- the law we are required - to ensure prior 

existing water ---- rights will not be adversely 

affected --- and that the means - of diversion or 7 

construction are adequate. We - propose - to 

issue your permit subject -- to the following 

conditions in order to do so. 

"1. All - prior existing water rights. 

"2. Any final determination of existing water 

rights as provided by Montana law. 

"3. The permittee shall install and maintain 

a drainage device not less than 12 inches in 

diameter, in the bottom center of said dam in 

order to satisfy prior existing water rights. 

"4. The permittee shall submit to the Department his plans for the design of the emergency 

spillway and drainage device for approval before 

their construction and installation. 

"A 10 year frequency 6 hour storm would cause 

a peak flow of 8 cfs. Your spillway and drainage device should be designed to pass a combined 

flow of at least that amount. As your dam as 

proposed will hold only one acre-foot, it would 

be probably overtopped without a spillway. 

"Please notify us in writing within seven (7) 

days after receipt of this letter if you do 

not agree with our findings and proposal and 

request a hearing on your application. If we 

do not hear from you we will assume you do 

not request a hearing and issue your permit 

accordingly." (Emphasis added.) 
Subsequent exchanges between Wilson and the DNRC indicate Wilson's 

feeling that the DNRC had already determined rights without 

a hearing. Wilson also argued that Waltons could not have 

established rights in diffuse surface water prior to 1973, 

because common law did not recognize such water as subject 

to appropriation. The DNRC responded that it had made no 

final determinations as to rights and that Wilson could 

challenge its preliminary findings by requesting a hearing. 

On June 27, 1978, the DNRC notified the parties that 

hearing on Wilson's application would be July 12, 1978. On 

July 7, 1978, Wilson obtained an alternative writ of prohibition from the District Court ordering the DNRC to refrain 

from further proceeding on his application, for failure to 

hold its hearing within 60 days, as required under section 

85-2-309, MCA. In November, 1978, with no objection from 

Wilson, Waltons were permitted to intervene. Both the DNRC 

and Waltons sought an injunction against the Wilson dam; 

Wilson and Waltons sought adjudication of their rights to 

the coulee water. 

Following a June 1, 1979, hearing, the District Court 

granted the writ of prohibition; appeal from that decision 

was dismissed by this Court on the grounds that the District 

Court's decision lacked finality. 

After a trial without jury on July 29-30, 1980, the 

District Court granted injunctive relief against Wilson, 

holding that the coulee water was more than mere surface 

water; it was "water" within the meaning of the Water Use 

Act, and Waltons had a valid prior right to the water; the 

court awarded attorney's fees and costs to Waltons; Wilson 

was awarded attorney's fees against DNRC. 

On December 23, 1980, Wilson moved to have the award of 

attorney's fees to Waltons stricken, arguing that "there is 
no statutory, contractual or other basis upon which to base 

[the] award. . . " 

The District Court judge amended his findings and 

conclusions on December 29, 1980, to include the following: 

"FINDINGS OF FACT 

"26. The construction of the dam by the 

Relator was done in disregard of the Intervenors' obvious prior rights. 

"27. The construction of the dam and the 

litigation that ensued cost the Intervenors 

to seek legal counsel and to participate in 

litigation. 

"28. It would be inequitable for the Intervenors, innocent as they were to any wrong 

doing, to bear the costs for attorneys fees 

in litigation. 

"CONCLUSIONS OF LAW 

"19. The court has inherent power under its 

equity jurisdiction to grant attorneys fees 

to the Intervenors against the Relator." 

Relator Wilson appeals. 

On February 5, 1982, this Court, in response to written 

stipulation by Wilson and the DNRC, ordered that (1) the 

writ of prohibition be set aside; (2) the award to Wilson of 

attorney's fees against the DNRC be vacated; (3) the DNRC's 

appeal be dismissed; and (4) Wilson and the DNRC should each 

bear their own costs. Wilson has formally withdrawn the 

application for a beneficial water use permit for the coulee 

water and has ceased to impound the coulee water. The sole 

issue on appeal is whether the District Court erred in 

awarding attorney's fees to the Waltons. 

Waltons rely upon several statutes under which attorney's 

fees may be awarded. 

Section 85-2-125, MCA, provides: 

"If a final decision of the department [DNRC] 

on an application for a permit is appealed 

to district court, the district court shall 

award the prevailing party reasonable attorney fees." 
Wilson points out that here there was no appeal, no final 

decision; there was not even a hearing by the DNRC regarding 

his application for a permit. The only DNRC decision was 

that Wilson would have to file for a permit before he could 

build an impoundment structure; that decision preceded his 

application for a permit and was not appealed. The DNRC 

hearing on the matter was precluded by the DNRC's delay and 

Wilson's writ of prohibition. Section 85-2-125, MCA, is not 

applicable here. 

Waltons also rely upon section 27-1-317, MCA, which 

provides : 

"For the breach of an obligation not arising 

from contract, the measure of damages, except 

where otherwise expressly provided by this 

code, is the amount which will compensate for 

all the detriment proximately caused thereby, 

whether it could have been anticipated or not." 

Waltons maintain that because Wilson's wrongful acts forced 

them to bring an action in intervention to their detriment, 

section 27-1-317, MCA, is applicable. Wilson counters that 

section 27-1-317 has never been so broadly interpreted and 

to apply it here would extend the award of attorney's fees 

to every prevailing personal injury claimant in a noncontract action. 

The long-established rule in Montana is that, in the 

absence of some special agreement between the parties or 

statutory authorization, attorney's fees are not recoverable 

by the successful litigant. Nikles v. Barnes (1969), 153 

Mont. 113, 454 P.2d 608; Kintner v. Harr (1965), 146 Mont. 

461, 408 P.2d 487. Clearly there was no agreement between 

the parties in the case at bar. But Waltons would have us 

find "statutory authorization" in section 27-1-317, MCA, 

above, and in the references made to that statute in First 

Security Bank of Bozeman v. Goddard (1979), 181 Mont. 407, 420, 

593 P.2d 1040, 1047, and in McCarty v. Lincoln Green, Inc. 
(1980) Mont. , 620 P.2d 1221, 1225, 37 St.Rep. 

2007, 2011-2012. We do not find those cases applicable here. 

There is no specific mention of section 27-1-317, MCA, as 

applying to attorney's fees in Goddard. In McCarty, although 

an award of "damages plus attorney's fees" was challenged 

by appellant, this Court, in affirming, relied upon the statute 

in justifying the award of damages but never explicitly 

discussed attorney's fees. Besides, both Goddard and McCarty 

involved actions in tort; no tort liability has been alleged 

or found in the case at bar. Both the general rule stated in 

Nikles, above, and section 27-1-317, MCA, have been around for 

some time, yet this Court has not explicitly applied it to 

a request for attorney's fees. We decline to expand the Nikles 

rule to support an award of attorney's fees in this case. 

Finally, and more in line with the findings and conclusions 

of the trial court, Waltons rely upon the relatively new 

line of case law in Montana establishing a narrow exception 

to the rule stated in Nikles, supra. This Court, in a 

number of recent cases, has recognized the lower court's 

general equity power to make an injured party whole and held 

that, in some isolated cases, attorney's fees could properly 

come wi,thin that power. Such an award is within the lower 

court's discretion and will not be overturned absent a 

showing of abuse of discretion. Martin v. Randono (1981), 

Mont. , 623 P.2d 959, 962, 38 St.Rep. 209, 212. 

Cf. Stickney v. State of Montana, County of Missoula (1981), 

Mont. , 636 P.2d 860, 38 St.Rep. 1991; Joseph 

Russell Realty Company v. Kenneally (1980), Mont. I 

605 P.2d 1107, 37 St-Rep. 57; Holmstrom Land Co. v. Hunter 

(1979) 1 Mont. , 595 P.2d 360, 36 St.Rep. 926; Foy 

v. Anderson (1978), 176 Mont. 507, 580 P.2d 114; comment, 40 

Mont.L.Rev. 308 (1979). 
In Joseph Russell Realty - Co. and Martin we affirmed the 

trial court's refusal to award attorney's fees, while recognizing 

its equitable power to do so. In FOY, Holmstrom and Stickney, 

we affirmed the trial court's equitable award of attorney's 

fees, where defendants, through no fault of their own, were 

forced to personally defend against a frivolous action. 

Wilson argues that the Foy line of cases is not applicable 

here. In those cases, the defendants were made party to a 

frivolous action. It is true that Wilson did not sue ~altons; 

they voluntarily made themselves parties by intervening. 

But, at the time they intervened, Waltons had been deprived 

of the upper coulee water for nearly three years. Their 

requests for enough water to keep their stock pond full were 

ignored by Wilson and his attorney. Waltons' 1976 complaint 

to the DNRC culminated two years later in the DNRC's loss of 

jurisdiction over Wilson's application for a permit to 

impound the coulee waters. The District Court would determine 

rights to those waters, an adjudication to which DNRC admittedly 

was not a real party in interest. Clearly, the only way the 

Waltons could hope to protect their interest in the coulee 

waters was to intervene. 

We find there is room within the - Foy exception for 

those who reasonably find it necessary to intervene in a 

frivolous action, although not technically forced to become 

parties. 

Wilson argues that this was - not a frivolous action, one 

so spurious as to bring it within the - Foy exception. He 

maintains that there was a genuine controversy; that the law 

was such that he reasonably could have expected to prevail; 

that his position was supported by credible expert evidence; 

in short, that, although he did not prevail, the record 

clearly reflects a viable claim. 
Wilson alleged throughout the litigation that the 

coulee water was "diffuse surface water," and was not "water" 

within the definition of the Water Use Act. He also claimed 

that Waltons had no valid prior appropriation right to the 

coulee water because diffuse surface water, at common law, 

could be impounded by the person upon whose land it occurred, 

but was not a "water course" and was not subject to the law 

governing water courses. He emphasizes that he does not and 

need not challenge the merits of the District Court's determinations 

with respect to these matters. He only must prove that his 

position in the litigation was not frivolous or spurious, 

and hence should not have been brought within the - Foy exception. 

Let us consider Wilson's arguments. 

(A) Wilson argues that he believed "diffuse surface 

water" was not "water" within the meaning of the Water Use 

Act and hence believed the provisions of the Water Use Act 

did not apply to his stock water reservoir. 

The Water Use Act of 1973, 589-867(1) R.C.M., 1947, 

(now section 85-2-102(14), MCA), originally defined "water" 

as ". . . all water of the state, surface or subsurface, 

regardless of its character or manner of occurrence, including 

geothermal water." That definition was amended in 1977 to 

include "diffuse surface water." The minutes of a meeting 

of the Senate Committee on Agriculture, Livestock and Irrigation 

(March 17, 1977) show that one DNRC official considered the 

inclusion an "important change"; another was satisfied that 

the amendment would force the Bureau of Land Management to 

obtain a water use permit for diffuse water. Wilson argues 

that this amendment was necessary to prevent confusion 

reasonably arising under the original definition, which was 

in effect when he impounded the coulee water. 
Wilson's confusion derived in part from the fact that 

diffuse surface water, at common law, was - not subject to the 

same rules governing appropriation as were applied to water 

which flowed in a natural water course. Wilson relies upon 

Doney v. Beatty (1950), 124 Mont. 41, 220 P.2d 77, and 

authorities cited therein: 

--- "As to such diffused waters the plaintiffs 

--- did not and they cannot make a -- valid appropriation for --- use on their lands located a 

number of miles below, -- and the defendants 

-- have theright p 

to collect, capture -- and impound such diffused surface drainage while 

--- it is on their own lands and farms -- for use 

thereon." (Emphasis added.) 124 Mont. at 

50, 220 P.2d at 82. 

Waltons maintain that Doney was effectively superceded 

by Midkiff v. Kincheloe (1953), 127 Mont. 324, 263 P.2d 976, 

wherein this Court upheld the prior right of a downstream 

user in a water rights dispute factually similar to this 

one, although the water was only rain and snow runoff in an 

otherwise dry creek. We point out that in Midkiff, the 

issue of whether diffuse surface water could be appropriated 

was not before the Court. The Court considered only the 

extent of the prior use, before the upstream user impounded 

the runoff waters. Furthermore, Justice Adair, in a strong 

dissent referred to the Doney rule, and clearly articulated 

the common law rule that an upstream user 

". . . has the same right to impound, store 

and put to beneficial use these flood and 

waste waters while they are upon his lands 

as has the [downstream user] when they reach 

his holdings. 

"It is the general rule that diffused surface 

waters resulting directly from rain and melting snow may be collected, impounded and put 

to a reasonable beneficial use by the owner 

of the land on which they occur, so long as 

such waters remain on such owner's land. In 

the event the landowner makes a reasonable 

use of waters resulting from rain and melting 
snow, and particularly of such as result from 

precipitation on his own land, such waters 

may be treated as 'flood, seepage, and waste 

water' of which he may make an independent 

appropriation under R.C.M. 1947, sec. 89-801, 

supra, by impounding them in a reservoir. Compare Doney v. Beatty, 124 Mont. 41, 220 Pac. 

(2d) 77." 127 Mont. at 332-333, 263 P.2d at 

980. 

In light of the 1977 amendment of the definition of "water," 

and the common law rules with regard to appropriation of 

diffuse surface water, we find that Wilson reasonably could 

have believed diffuse surface water was not subject to the 

provisions of the Water Use Act in 1975 when he built his 

road. 

(B) Wilson argues that there was a genuine controversy 

as to whether the coulee water was diffuse surface water. 

In Doney v. Beatty, supra, 124 Mont. at 51, 220 P.2d at 

82, this Court contrasted a water course with diffuse surface 

waters: 

"A water course in general has a definite 

channel as well as a flow of water while 

diffused surface waters are waters which, in 

their natural state, occur on the surface of 

the earth in places other than water courses 

or lakes or ponds. The diffused surface 

waters may originate from any natural source. 

They may be flowing, vagrantly over broad 

lateral areas or, occasionally for brief 

periods, in natural depressions, or they may 

be standing in bogs or marshes. 

"The essential characteristics of diffused 

surface waters are that their flows are shortlived and that the waters are spread over the 

ground and not concentrated or confined in 

channel flows of legal watercourses nor yet 

concentrated or confined in bodies of water 

conforming to the definition of lakes or 

ponds. 

"In 1 Kinney on Irrigation and Water Rights, 

2d Ed., in discussing water courses in section 301, at page 486, the author quotes with 

approval the definition of a water course 

appearing in an Idaho case, as follows: '"A 

water course is a stream of water flowing in 

a definite channel, having a bed and sides or 

banks, and discharging itself into some other 

stream or body of water. The flow need not 
be constant, but must be more than mere surface 

drainage occasioned by extraordinary causes; 

there must be substantial indications of the 

existence of a stream which is ordinarily a 

moving body of water".' Again in section 

312, Kinney says: 'But a water course does 

not include holes, gullies, or ravines in 

land, in which mere surface water -- from rain 

- or melting snow at irregular periods, is discharged through them from a higher to a lower 

level, and which at other times are destitute 

of water. In the absence of a permanent 

source of water supply there can be no water 

course in its legal sense.' Emphasis supplied. See: 1 Wiel on Water Rights in the 

Western States, 3d Ed., page 354, sec. 334; 

LeMunyon v. Gallatin Valley Railway Co., 60 

Mont. 517, 199 Pac. 915." 

And in the dissent in Midkiff v. Kincheloe, supra, Justice 

Adair discussed the kind of water which could be appropriated 

by the land owner as long as it was on his lands. That 

water included "flood, seepage, and waste waters." The 

water of the gully in Midkiff "[came] directly from either 

melting snows or heavy rains that have fallen upon the 

surface of the lands of Kincheloe and others lying within 

the drainage area of the gully," and were unquestionably 

diffuse surface waters according to Justice Adair. We 

repeat that Justice Adair objected to the majority's failure 

to consider and apply the existing law regarding water 

courses and diffuse surface waters, not their contrary 

application of it. 

Here, it is true, the coulee also contained several 

developed springs above the Wilson dam. But the witnesses 

testified that the coulee was dry at least half the year, 

and that nearly all of the water in it was snow-melt and 

rain runoff. At least one expert (Wilson's) testified that 

he could find no clearly-defined channel, and no evidence of 

moving water, although he spent many hours on the property. 

Another testified that the plants in the bottom of the 

coulee were of a type which could not grow in rapidly flowing 
water. 

There is no definition of diffuse surface water in the 

Water Use Act. We find that Wilson reasonably reliedupon the 

common law for a definition of diffuse surface water. That 

definition was similar enough to the waters of the coulee, 

that, given the supporting expert's information, Wilson's 

position was not without merit. 

(C) Finally, Wilson argued that he reasonably believed 

Waltons had not obtained a prior right to the coulee water 

before the effective date of the Water Use Act, July 1, 

1973. The common law rule, which Wilson believed applied to 

the Waltons' impoundment of the coulee waters, if they were diffuse 

surface waters, was that Waltons could only impound those 

runoff or waste waters which flowed on their own land. An 

upstream user could appropriate those diffuse surface waters 

occurring on - his land. Therefore, Wilson believed that, as 

Waltons had not applied for a beneficial use permit under 

the Water Use Act after July 1, 1973, they had no superior 

claim to the coulee waters. 

Wilson has not challenged the District Court's determination 

that: 

(1) Waltons had a prior right to the coulee waters; 

(2) The coulee waters were more than mere surface 

waters; and 

(3) The coulee waters were subject to the provisions 

of the Water Use Act. 

He simply argues that considering the evidence before the 

District Court, that court improperly invoked its equity 

power in awarding attorney's fees to the Waltons. We agree. 

This Court will not overturn findings of fact of a 

District Court where they are supported by substantial, though 
conflicting evidence, unless there is a clear preponderance 

of evidence against such findings. The evidence is to be 

viewed in the light most favorable to the prevailing party. 

Cameron v. Cameron (1978), 179 Mont. 219, 587 P.2d 939. 

Clearly, the District Court believed that Wilson had 

acted improperly in constructing his dam without first obtaining a beneficial use permit from the DNRC, in blocking off 

virtually all the Waltons' coulee water, knowing they had 

impounded it previously, and in prohibiting the hearing of 

his own petition for a beneficial use permit. But the - Foy 

exception has been narrowly drawn, and is applicable only where 

the action into which the prevailing party has been forced 

is utterly without merit, or frivolous. In - Foy, Holmstrom, 

and Stickney, the parties who were awarded attorney's fees 

had been forced to defend themselves in actions which could 

not reasonably have been seen as viable, actions in which the 

court was used more as an instrument of harassment than as 

a means to settlement of a legitimate dispute. 

Here the preponderance of evidence supports Wilson's 

argument that his position, while it did not prevail, could 

not be classed as spurious. Wilson has presented persuasive 

arguments, discussed above, supporting the apparent viability 

of his claim. And we find that while Wilson indeed encroached 

upon prior rights of the Waltons, those rights were not "obvious 

prior rights," and Wilson had a reasonable basis to believe 

that he might establish his right to capture snow melt and 

runoff while it was on his land. Therefore, to the extent 

that the District Court found Wilson's encroachment to be 

upon an obvious prior right, we vacate its amended finding of 

fact No. 26. And because Wilson had a reasonable basis to 

believe that his cause might prevail, we find that his action 
was not frivolous or utterly without merit, the - Foy exception 

is inapplicable, and the District Court erred in awarding 

attorney's fees to the Waltons. 

We remand this cause to the District Court for correction 

of its February 5, 1982, order insofar as it grants attorney's 

fees to the Waltons. 

We Concur: 

Justices 

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