The Spanish Ambassador and his family move into the house next to the convent. The son, Pepito, proves to be what Madeline calls "a bad hat"; an ill-mannered, mischievious braggart. One day, Pepito offers a cat to a pack of excited dogs and is hurt in the ensuing chaos. Madeline and Miss Clavel rescue him and Pepito vows to mend his ways. Pepito the angel is bothersome too - he frees the animals at the zoo! Madeline helps to put them back and they say farewell to the bad hat.