Diego doesn't know that Ricardo has developed a hatred for Zorro. He makes matters worse when he substitutes a block of wood for a box of chocolates intended for Anna Maria. When she opens her present and Ricardo sees the wood, complete with a carved "Z", he decides to kill his unmask his foe.
Ricardo plans to draw Zorro out of hiding by placing notices throughout town that accuse the outlaw of being a coward and challenging him to a duel. Diego tries to ignore Ricardo but eventually is forced to defend his honor. When he rides to where his friend is practicing, Diego is surprised to see that Ricardo is an expert with several weapons, which will make the upcoming contest a difficult one.
Unbeknown to Diego or Ricardo, Sergeant Garcia and several others plan to let the duel take place, then capture Zorro and claim the reward. The men hide themselves near the site of the duel and wait for Zorro to arrive. Not long after, the masked man appears and the duel begins.
Just as Diego feared, Ricardo is very good with the sword and has no qualms about injuring his opponent. Diego, on the other hand, doesn't want to hurt his friend, so he fights with reduced strength. Even with this handicap, he defeats Ricardo, only to then discover himself surrounded by the reward seekers. Ricardo surprises him by fighting at his side, for the cowardly attack has offended his sense of adventure. Together they fight their way free, and a grateful Zorro makes his escape.
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