Desperate for a hiding place in the canyon, the wounded Zorro reminisces further how he showed Felipe his set-up in the hacienda's secret escape trough the fire-place to the hide-out cave. The alcalde's arrests of don Alejandro and Victoria Escalante and Mendoza's uttering that nothing scares soldiers more then the unknown inspired don Diego to invent the mysterious black-cloaked and -masked man, named after he cunning fox ('zorro' in Spanish) found in the hide-out by Felipe, who proved an ideal assistant once Diego found out the mute boy is not deaf.

Zorro and Felipe bravely made their last stand, but they face only their horses: Toronado even found a way out so they get home. Mendoza returns with nothing but Zorro's costume, still gets the 500 pesos reward, but is taxed on his windfall during military service- at 100%. Diego learns from Dr. Hernandez the news of Zorro's death makes the alcalde even crueler, but is too sick to stand up. Victoria tells him the alcalde resumes the forced labor, invents new taxes, even on income, and prepares a memorial service with a fake Zorro-corps to bury the myth.