In Episode 51, Grace prepares for her first ball, complaining about not being able to go down right away. When Carey learns that Johnny and Paul have arrived, she allows Grace to go. John Henry and Lazarus deal with townspeople who are angry after learning of Madison's reputation. At the ball, Grace unwittingly tells Johnny of Carey's plans to marry him. Johnny agrees to go along with the ruse. Meanwhile, in San Francisco, Tess agrees to take care of Stuart's baby if Nick will consent. And in Liberty Creek, walking towards her cottage, Madison confesses her past to her brother, Cole. She tells him of her gambling compulsion, losing her money to Robert Marshall. In turn, Cole tells Madison of his past, having to change his name because of his actions. When they reach the cabin, they find the interior a vandalized mess.

In Episode 52, Madison and Cole go to John Henry's office, where he confronts Madison about the rumors swirling around about her. She explains them by introducing Cole as her brother and tells John Henry of the break-in at her cabin. At the ball, Charles and Mary face Grace with the fact that she is too young to be there. Paul interrupts and asks Grace for a dance. On her way to the school house, Madison is stopped by Jack who asks for her forgiveness, which she gives. At the school, Mrs. Greta Faust turns her son David over to Madison for school. At Belleterre, Jack reaches Louisa with the news that she has been asked to attend the art academy, as his father's friend believes Louisa to be a real talent. Olivia returns home to Belleterre with Joey, where John Henry welcomes her and Christopher introduces her to Baby Livie.

In Episode 53, Robert returns home to find Olivia mourning, and he learns of Baby Faith's death. He tells Olivia of his life in Boston, and his gambling. Tess and Stuart also return home to Nick's welcome. Meanwhile, at Belleterre, Robert is surprised to find Madison, whom he met back in Boston while gambling. Madison claims Robert cheated her out of her money and demands a rematch. Back in London, Carey, Grace, Laura and Samantha chat about the ball. Grace receives a letter from a secret admirer who is not so secret to Carey. Mary surprised Carey by revealing that her engagement to Johnny is already in the gossip mill. Liberty Creek's first year anniversary is celebrated by a montage of scenes: Georgie's pregnancy, the London situation, Richard and Flora looking on at their Australian ranch, and finally Cole and Jack apologizing while a mysterious figure lurks by.

In Episode 54, Olivia approaches Stuart at Tess and Nick's house. Stuart shows Olivia her baby, and Olivia tells Stuart she isn't angry with her. Louisa and Julia go to Jack at his clinic, where Louisa tells Jack she has decided to accept. Back at Belleterre, Olivia receives a telegram from Richard offering her an invitation to Australia during her time of need. Olivia decides that going to Australia would be best, and tells John Henry so. Robert answers Madison's challenge of a rematch. Madison claims a straight, wins, and kisses Robert on the cheek before returning home. Robert picks up his cards to reveal a full house before clearing the cards and leaving the library. Tess and Nick return home to find Stuart and the baby gone with no explanation. They hurry to Belleterre, where all are stunned to see Olivia holding Stuart's baby in her arms.

In Episode 55, Olivia explains that Stuart left on horseback and left Olivia her baby. She gives a note to Tess and Nick and excuses herself. Robert asks Olivia to lend him money, not mentioning Madison by name, and Olivia agrees. He later finds Madison singing while flipping through a book. He gives her the money and compliments her on her voice. In London, Scotty finds Carey, and she asks him not to tell Grace about the love letters written by Paul. Back at Belleterre, Madison is overjoyed to find her friend, Emily, has come to visit her. Madison recounts the past few days and they hurry off to eat. Joe finds Olivia with Carolina in her arms. Olivia describes to him what has happened and that they are to adopt her. Olivia tells Joe she is leaving with Joey to Australia for an indefinite period of time.

In Episode 56, Cole helps Madison move her things to Belleterre and expresses concern about her safety. Jack enters and asks Madison to accompany him to the Independence Day Ball. Cole is quite the older brother when he asks Jack to ask him for permission. Madison cuts them both off, accepting Jack's invitation. In Philadelphia, Louisa and Gabe Hewitt meet Professor Lundy of the Art Academy. The professor expresses his belief in Louisa's talent and his wish for her to come to the Academy in the autumn. Back in Liberty Creek, Emily, Mrs. Pendergast, and Greta discuss the budding relationship between Jack and Madison. They decide to form a plan to get Jack and Madison together. Tess, Nick, Sally, and Freddie tour Nick and Tess's new house when Freddie reveals that he will be running for Parliament as opposed to taking one of the extra Marshall titles. In England, Grace returns home to find a letter from her secret admirer and she tells Carey that she thinks she is in love with Paul Moody as well as the letter-writer. After Carey reads the profession of love in the letter, she hurries out to run an errand.

In Episode 57, Gabe and Louisa meet Rilla Schmidt and her two daughters, Hildy and Ada, on the stagecoach returning to Liberty Creek. Gabe treats Ada's case of food posioning. Paul approaches Grace in London, startling her by professing his love for her. He leaves her flustered and confused in the garden. In Liberty Creek, Madison sits with Greta and Emily, discussing the upcoming Independence Day ball. Jack drops by and Madison brushes him off, much to the concern of Emily and Greta. Madison also reveals that she has a certain weakness for a rebellious man. Rilla Schmidt arrives in Liberty Creek, much to the surprise of Mrs. Anders (her mother, the cook at Belleterre) and Nick.

In Episode 58, the Fourth of July festivities begin with a speech from John Henry. Grace appears at a ball in London in a very festive 4th of July dress. She learns that Paul Moody has been the one to write the loveletters, and she is about to kiss him when Charles interrupts them. Belinda later tells Paul the Grace is only fifteen, shocking him. Madison descends the stairs looking very radiant and beautiful, leaving Robert breathless. At the dance, Marietta becomes jealous when she sees Rilla dancing and flirting with her husband. She goes over to her and asks her rudely to leave. Madison dances with Jack, having a great time, and her brother cuts in. Then Robert tries to cut in, but Cole doesn't let him until Madison tells Cole that she can take care of herself. To Cole's joy, Jack cuts in again not much later. At the end of the celebration, Madison and her class show a brilliant fireworks display, but Madison faints in Robert's arms. Jack and Gabe rush over to her, and Gabe diagnoses her with acute appendicitis, saying that her appendix must come out immediately.

In Episode 59, the pace becomes frantic as Gabe and Jack make preparations for the operation. They leave Robert alone momentarily with Madison, and in her delirium, she sees Robert as Nick and tells "Nick" that she is in love with Robert and that if she doesn't make it through to tell Robert so. Robert is stunned. Paul visits Carey and confides in her what Belinda told him. He says that the relationship will end for the time being, but not entirely. Later, he tells Grace the same thing: the relationship must end for now, but he doesn't tell her that he knows her true age. Robert and the others wait for news of Madison, and in his nervousness, he almost tells Nick what Madison told him. Jack comes out, though, and he announces that she is fine. He only allows two people to see Madison: Emily and Cole, who throws Robert a dirty look. In London, Carey, Scotty, Johnny, and Grace wait for some friends when Belinda butts in, saying how much she enjoyed Paul's company. Tess and Rilla sit, watching Rilla's children, and Rilla learns that Tess is pregnant. Rilla talks of how Nick would only be truly happy with a boy, leaving Tess very concerned and nervous.

In Episode 60, Gabe and Louisa return home to find Georgie has grown quite a bit. They discuss Stuart. At Belleterre, Robert peers into Madison's room and finds her sleeping, but he trips and falls onto the bed with her. He says he came to see how she was doing, and helps her out of bed. Cole shows up, being as uncivil to Robert as always. When he leaves, it is apparent Madison is taken with Robert. At Freddie and Sally Marshall's stage, several people joke around and discuss Grace and Madison. At Tess and Nick's, Tess is distraught over Rilla's previous words about the sex of her baby. She talks about it with Nick, and he tell Tess it's nonsense: he'd love a boy or a girl equally. In London, Paul dances with Grace one last time before he leaves. Belinda chats with her new friends, and leaves to get refreshments for her new group, but she spikes Frank Pritchett's drink.