Celesta Villagrana and her servant, Montez, are on their way to Los Angeles when a hooded robber stops them and steals her jewelry. The thief knocks the travelers to the ground then departs, leaving Celesta lying there unconscious. Bernardo rides by and sees a piece of jewelry glinting in the sunlight. He stops to pick it up but Celesta awakens and mistakes him for a thief. She screams, and Sergeant Garcia arrives in time to hear her accuse Bernardo, which leaves him no choice but to arrest the mute servant.
The case appears to be a strong one and is further strengthened when Montez picks Bernardo out of a line-up. Diego is sure he saw a secret signal passed between Montez and a Señor Lopez who is watching the procedures, which has let Montez know whom to accuse.
Hoping to clear his friend, Zorro confronts the two men as they talk that night in the tavern. He accuses them of being the real thieves, but they deny the charges. Zorro then uses his sword to slash open Lopez's coat and the jewelry falls to the ground, thus proving Bernardo's innocence.