- The new Commandante arrives at the pueblo, but he is really an impostor and a fellow member of the Eagle Feather Brotherhood with the Magistrado.
- An agent of the Eagle arrives in Los Angeles to pose as Don Juan Ortega, the new Comandante. He informs the Magistrado that the real Ortega was thrown overboard during the voyage to Los Angeles. The imposter Ortega is told it his mission to demoralize the people, raise money for the Eagle and capture Zorro. They decide to charge any wealthy ranchero who is not of noble birth with trespassing on the King's land so their lands and fortunes can be collected. Diego and Rosalita are upset when their friend Franco Barboza, a wealthy ranchero of common birth, is arrested and sentenced to hard labor in a grist mill. They argue with the Magistrado that Barboza legally owns the land, but the Magistrado refuses to set him free. Meanwhile, Sgt Garcia tells Ortega's soldiers of his plan to capture Zorro when he comes to rescue Barboza from the grist mill. The soldiers lock Garcia up so they can keep the reward for themselves. Zorro comes to free Barboza and defeats the soldiers. Capitan Ortega also arrives and tries to fight Zorro, but is defeated and marked with a Z.
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