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After Karen Wright and Martha Dobi graduate from college, they turn Karen's Massachusetts farm into a boarding school, encouraged by Joseph Cardin, a local doctor. The school opens thanks to the wealthy Mrs. Tilford, who sends her difficult granddaughter Mary there. Karen and Joe fall in love, unaware that Martha is in love with Joe, and trouble begins when Martha's self-serving, frivolous aunt, Lily Mortar, comes to stay. One evening, Joe comes to visit Mary, who has gone out, and falls asleep in an easy chair in Martha's room. When he leaves a short time after awakening, Lily sees him and assumes the worst. A few days later, when Mary is caught in a silly lie, she feigns a heart attack, and Joe is summoned, precipitating a quarrel between Martha and her aunt. Lily leaves, but not before loudly confronting Martha with accusations about Joe. When Martha discovers that Rosalie Wells and another student have been listening at the door, she asks them to leave, and accidentally closes the door on Rosemary's arm. Martha apologizes and Rosalie doesn't plan to tell anyone, but when Mary finds a missing bracelet that belongs to another girl among Rosalie's things, she forces the frightened Rosalie into revealing her secret. Mary then goes to her grandmother's house and distorts her story about the argument, then bullies Rosalie into backing her up by threatening to reveal her theft of a girl's bracelet and by twisting her injured arm. Mrs. Tilford is shocked at the accusation and sees to it that all of the girls leave the school. Martha and Karen do not know why all of the girls are withdrawn from school and are incredulous when one of the girls's chauffeurs tells them why. They then confront Mrs. Tilford, but Rosalie is so frightened by Mary that she hysterically cries that it is true. Martha and Karen then sue Mrs. Tilford for libel, but, with Lily not there to testify, they lose. After the humiliation of the case and Joe's dismissal from his hospital over the scandal, Lily finally returns, acting as if everything is fine, and pretending that she thought her testimony would be irrelevant. Though they hope to start their lives over, the pressure has been too great, and Karen and Joe part when she admits that she, too, now believes the lies. Martha then admits to Karen that she does love Joe but he has never known. Martha decides to leave with Lily, but on the train, when Lily casually mentions the story of the missing bracelet, Martha realizes what has happened. She then goes to Rosalie and gently helps her reveal the truth. Now realizing the horrible wrong that she has done, Mrs. Tilford offers recompense, but Martha only asks her to tell Karen to follow Joe. Finally, in a cafe in Vienna, Karen and Joe are happily reunited.