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After a fire destroys a Catholic orphanage in the Canadian province of Quebec, the sisters find little Patsy hiding in the woods with her pet goldfish. Patsy tearfully explains that she accidentally started the fire when she awoke from a nightmare and knocked over a lantern, and is comforted by the sympathetic Sister Josephine. Without a dwelling that will accommodate all the orphans, the sisters and their charges board a train and travel the dominion seeking homes for some of the children. They stop in the drought-ravaged province of Scourie, Ontario, and Father Reilly, the local priest, informs Sister Josephine that most of the residents are Protestant. When the orphanage bully, Edward, threatens her goldfish, Patsy wanders to a nearby lake and is about to release her beloved pet when she is intercepted by Victoria McChesney, wife of the local shopkeeper and mayor. Drawn to the sweet-natured Patsy, the childless Victoria takes the girl to her husband Patrick's general store and suggests that they adopt her. However, Patrick, a staunch Protestant royalist, insists that Patsy be sent on her way. Even though Victoria tries to make Patsy miss her train, they reach the station just in time, prompting Victoria to tell Sister Josephine she wants to adopt the little girl. Father Reilly and some townspeople object because Victoria, who is from Northern Ireland, is Protestant, but Victoria promises that Patsy will be raised in the Catholic faith. That evening, when Patrick comes home from work, he is surprised to find Patsy there, but glumly tries to adjust to the situation. Soon after, Edward is adopted by the Catholic Swazey family, and word gets out that the McChesneys have adopted a Catholic child. Newspaper editor B. G. Belney, Victoria's former suitor and Patrick's opponent in the upcoming parliamentary election, is delighted by the news. Meanwhile, on Patsy's first day of school, she is shocked to find the mean-spirited Edward in her class. The next day, while Patrick is out of town, the paper runs a front-page editorial criticizing the McChesneys and alleging that the adoption was an attempt on Patrick's part to curry political favor with Catholics. Furious, Victoria finds Belney at the barber shop and pelts him with a wet towel. That afternoon, Patsy comes home in tears because of Edward's insulting remarks about her illegitimacy, but Victoria assures the child that her parents were not bad people. The controversy over the adoption continues, boding ill for Patrick's political career, and the townspeople begin boycotting his store. One night, Patrick proposes to Victoria that they send Patsy away, unaware that the child is listening to their conversation from the stairs. Meanwhile, a terrible blaze breaks out at the schoolhouse, and the firemen detect evidence of arson. A hearing is held to discuss the matter, and, as Edward had already spread the news about Patsy's role in the orphanage fire, suspicion falls on her. Victoria announces that she and her husband had already decided to return Patsy to church authorities, due to business and political pressure. Patrick then surprises Victoria by standing up for his adopted daughter and resigning his public office. The McChesneys happily return home, but are horrified to discover that Patsy is gone. While a search party frantically looks for Patsy in a violent rainstorm, Father Reilly goes to the newspaper office and shows Belney a letter in which Edward confesses to burning down the school while attempting to start a small fire to get Patsy in trouble. Meanwhile, in the woods, Patsy encounters Edward, who has also run away, and the children set off on foot for Manitoba. The next morning, Victoria finds Patsy's goldfish and necklace by the bridge and breaks down, assuming the worst. Just then, she hears a sneeze and finds Patsy and Edward under an overturned canoe. Patrick tells Patsy how much he wants to be her father, and both children are reunited with their families.