The Story Line
With Martinez in jail for the botched robbery, the capitan has another scheme to discredit Zorro and fakes the prisoner's death, burying a coffin full of rocks in his place. This will allow the fake Zorro to rob the villagers and then vanish, finally discrediting the masked rider.
That night, Martinez steals a jeweled crown from the mission. Martinez slashes a bold "Z" across the altar to frame Zorro for the crime, and while fleeing, kills an Indian who saw the crime. Monastario's plan appears to be working, for the people begin to turn against Zorro, believing their former hero to be a villain. Even Padre Felipe is convinced that Zorro was behind the theft and murder.
Diego is confused, for he, too, believes Martinez to be dead. In an attempt to find the new impostor, he visits the tavern. There, he secretly tosses a fake ruby at the feet of a dancer, followed by other gems which could have come from the stolen crown but are actually Diego's possessions. The resulting confusion upsets the commandante, for he suspects Martinez of having broken his promise to stay in hiding.
Monastario rides to where the killer is staying to check on him. Martinez denies the capitan's allegations and in turn accuses Monastario of trying to cheat him. The two draw their swords and begin to battle, with Martinez soon defeating the capitan. Diego wants to capture Martinez, but he has to pretend to be clumsy with a sword to protect his secret. His plan to capture Martinez almost works, but Monastario shoots the outlaw to death to stop him from revealing the capitan's involvement.