conclusion and enjoin the enforcement of the judgment.
If the State Court committed error in rendering its judgment on the basis of fraud, it cannot be corrected by a Court of Bankruptcy for the proper recourse is by appeal. The judgment of a State Court must be given its full effect under the principles of 'full faith and credit' and comity between the Federal and State Courts.
In the case of Heiser v. Woodruff, 327 U.S. 726, at pages 736 and 737, 66 S. Ct. 853, at pages 857 and 858 it was stated:
'Undoubtedly, since the Bankruptcy Act authorizes a proof of claim based on a judgment, such a proof may be assailed in the bankruptcy court on the ground that the purported judgment is not a judgment because of want of jurisdiction of the court which rendered it over the persons of the parties or the subject matter of the suit, or because it was procured by fraud of a party. * * * But it is quite another matter to say that the bankruptcy court may reexamine the issues determined by the judgment itself. It has, from an early date, been held to the contrary. * * * Nor can an attack be sustained on a judgment allegedly procured by fraudulent representations of the plaintiff, when the charge of fraud has been rejected in previous litigations by the parties to the suit in which the judgment was rendered, or their representatives. * * *
'Neither Pepper v. Litton, supra, on which respondents chiefly rely, nor the other cases which they cite, sustain the contention that the bankruptcy court, in passing on the validity of creditors' claims, may disregard the principle of res judicata.' (Emphasis supplied.)
This Court is, therefore, of the opinion that where the nature of a liability is in issue and has been previously determined by a court of competent jurisdiction, as here, under the principle of res judicata, the issue so determined is established conclusively. See Ehnes v. Generazzo, 19 N.J.Misc. 393, 20 A.2d 513 (Essex County Court of Common Pleas, 1941), and also 8 C.J.S. Bankruptcy § 573, page 1522, which states:
'Where it does not appear from the judgment itself just what the nature of the action was, whether it was obtained in an action for fraud such as will bring it within the exception herein will be determined from an inspection of the entire record on which the judgment was based. Beyond the record, however, the court may not go; hence, where the judgment recites that the cause of action was based on an account, the judgment creditor cannot go behind the judgment and prove that the transaction out of which it arose was fraudulent, so as to avoid the effect of a discharge.'
And Collier On Bankruptcy, Vol. 1, § 17.16, at page 1623:
'In general the reduction of a claim to a judgment does not affect its nature as a non-dischargeable debt, dischargeability being dependent upon the nature of the claim behind the judgment. Where, however, a liability has been prosecuted to judgment, the record is usually held decisive as to the character of the claim upon which judgment is founded, and cannot be affected by the introduction of parol evidence except in the case of ambiguity. In order that a judgment based upon a fraudulent representation may be excepted from the operation of a discharge, the record in the action must show that fraud and deceit were the 'gist' and 'gravamen' of the action.'
In the instant case, the judgment of the State Court clearly was rendered on the specific finding of fraud, there is no ambiguity of the judgment and an examination of the pleadings and issue indicate that fraud was the 'gist' and 'gravamen' of the action. Thus, it is felt that in the absence of the judgment being void for a want of jurisdiction or having been obtained by extrinsic or collateral fraud, enforcement of the judgment in the State Court should not have been restrained on the improper grounds that the judgment was not justified or a nullity. As previously stated, if the State Court judgment for fraud was not supported by the evidence, or some element of fraud was lacking, or that Court committed error, the appropriate State Court proceedings should have been pursued.
The decision of the Referee is hereby reversed but the restraint to continue for a period of thirty (30) days to allow the respondents to pursue whatever appropriate State Court remedies are available to them.