As Maggie is haunted by nightmares over her husband Richard's death, Angela surprises her friends and family with her calm resignation over losing control of the winery empire, while Melissa mercilessly wields her newfound power over everyone within her domain, down to the field hands and household help. As Maggie must take control over Richard's vast financial empire, she tries to cope with the agony of his murder by the underground group, The Thirteen. After leaving years ago after a dispute with her family, Pilar Ortega, not only the daughter of the vineyard foreman at Falcon Crest but also now a bank vice president, returns and provokes intense curiosity throughout the valley.

As the Falcon Crest mansion is engulfed in flames, Lance plunges desperately into the inferno to try to save Melissa, who is trapped inside. The aftermath of the fire has surprising repercussions for the residents of Tuscany Valley. Meanwhile, Angela secretly arranges a meeting between Frank Agretti and his long-estranged son, Nick. Richard anxiously launches a search to discover who was behind the assassination of The Thirteen. In pursuit of an exclusive story, Emma obtains a job typing for a reclusive writer, R.D. Young, and soon meets his assistant, Cabot.

When Angela offers District Attorney Fields her support for the governorship in exchange for dropping the murder charges against Lance, he indignantly refuses; however, when Richard offers to hire Field's leukemic son to join the staff of The New Globe, Fields agrees to the deal. Lance, on the other hand, is not grateful; he wanted to prove his innocence in court. Although not charged with any crime, Maggie is guilt-ridden by the fact that she killed Senator Ryder, even though she did it in order to save Richard's life. After Nick Agretti is enraptured when he witnesses Pilar swimming nude, Angela informs him that she has learned some information he cannot release, revealing that the price for keeping the secret is Falcon Crest itself.

After Angela blackmails Nick with incriminating information about his past, Nick surrenders Falcon Crest to Angela. While Angela makes plans to rebuild the house, Nick regrets his deference to her and warns that he will not bend in the future. Nick decides to tell Ben the truth about his mother, which enrages the young man. Richard's newspaper prints the fact that Melissa had placed a phone call after Lance's departure, proving that Lance is innocent of her death. Richard warns Pilar not to let her affair with Lance interfere with Richard's takeover of the valley. When Frank's old friend Libby appears, Nick and Ben are surprised. Libby requests Frank to join her in Columbia to mine emeralds, which is an offer that disturbs Angela. As Emma and Cabot begin an intimate relationship, Cabot questions her true identity.

As Christmas arrives in Tuscany Valley, Frank agonizes over whether or not to leave his family to mine emeralds with Libby. Ben turns against Nick for lying to him about his mother. Unaware of Richard's assistance, Maggie is delighted with the overwhelming response to her special advertising offer. Richard offers to back Pilar's failing consortium through a blind company for a controlling interest. When Daniel Cabot discovers Emma's true identity, he abandons her. Although Angela celebrates the holiday by surrounding herself with family, Pilar's holiday is spoiled when she spots her brothers Tommy and Paco being chased by security officers. However, Christmas dinner at Pilar's home brings Nick and Ben closer together and Nick to admit his love for his father.

Mercedes and her husband pressure Pilar to sign papers allowing them to adopt Lisa. Although Pilar realizes that Mercedes is the only mother the child has ever known, the thought of a final, legal adoption is more than Pilar can bear. When Pilar goes to Lance for consolation, she discovers him with an attractive young woman. After Angela is outmaneuvered for the purchase of a bottling company, she is determined to learn who is behind the consortium. After Maggie's newspaper office is mysteriously trashed a few days before the first edition, Emma discovers that Cabot has been lying to her about his true identity.

Angela is delighted when Emma announces her intention to marry the famous writer, R.D. Young, but her plans for the wedding conflict with Young's passion for privacy. Hurt by Lance's involvement with Cookie Nash, Pilar turns to Nick for consolation. Moreover, Angela discovers that it was Pilar who organized the consortium with Richard. When Maggie discovers that Tommy was present when her newspaper office was trashed, she must decide whether to give him a second chance.

Angela's hands-on approach to Emma's forthcoming wedding may prove futile when the bride and groom call the festivities off. After Emma breaks the news to Angela that the wedding is off, her prospective bridegroom, R.D. Young, apologizes for his behavior and announces that the wedding is on schedule again. During the wedding rehearsals, Young's nervousness escalates and he convinces Emma to elope. After Pilar accepts Lance's apology about Cookie Nash, their romance resumes. Nick fails to persuade Ben to curtail his relations with the Cellini family, despite his warning that the family is dangerous. An unannounced visitor adds turmoil to Tuscany Valley.

As Angela continues to press for information on the consortium, Pilar divulges surprising news to Lance. After Angela follows the paper trail leading from the consortium to Richard's company, she confronts Richard. Making peace, Nick and Anna reach an accord about Ben. In conclusion, Pilar drops a bombshell piece of news on Lance: he is Lisa's father.

Despite Angela's obvious opposition, Lance and Pilar decide to marry. Maggie, appalled at Richard's plans for the valley, leaves him. Hoping to prevent Lance and Pilar's marriage, Angela, who has made a deal with Sinclair, tells Lance that Pilar was well aware of Richard's business dealings; however, Pilar convinces him otherwise, and the wedding is definitely on. After Nick learns the seriousness of Anna's condition, he convinces her to allow him and Ben to care for her, provided that Ben not be told of her illness. After Raoul and his gang run Ben and Gabriel off the road, the gang leaves them unconscious on the roadside.

Maggie's rebuff of Richard's attempts at reconciliation cause unexpected results. Upon hearing news of the car accident, Lance and Pilar immediately return home. With Ben and Gabriel in serious condition, Anna feels guilty over having given Ben the car. While the hospital staff quibbles about accepting Gabriel, he goes into convulsions, requiring immediate surgery. Angela, though not approving of the marriage, invites the newlyweds to make their home at Falcon Crest. In response to Maggie's rebuff, Richard pressures a judge for a court order that transfers custody of the boys to him. Accompanied by the Sheriff, Richard removes the children from Falcon Crest.

Michael, despondent at his mother's continued absence, runs away. Richard moves to block Angela's latest power play, while Frank Agretti returns to the Tuscany Valley. While Angela is prepared to help Maggie wrest custody of the children from Richard, Richard prepares to clip Angela's wings decisively in the matter of Glenbraddoch. Meanwhile, Michael's disappearance causes concern. Learning of Ben's accident, Frank Agretti returns to the valley, while Pilar and Lance agree to try to make their home at Falcon Crest.

As Anna grows increasingly weaker, she desperately tries to convince Frank and Nick to help end her pain. After Maggie dissolves in tears after a phone conversation with Michael, Tommy consoles her, revealing his true feelings for her. On a business trip to Chicago, Richard encounters a glamorous woman who is a dead ringer for Melissa. Pretending that it will help his ill mother, Richard convinces his new conquest, Samantha Ross, to return to San Francisco and impersonate Melissa. After Richard agrees to Samantha's hefty price, the deal is cemented.

Having escaped with Samantha's help, Angela finds her family doubting her kidnapping story, but Pilar gains Angela's confidence with her plan to help her regain control of the Glenbraddoch stock. At the court hearing, Richard wins custody of the children. Angela agrees to protect Samantha from Richard's wrath and calls Lance to pick her up in San Francisco. However, Samantha disappears before he arrives. When Richard warns Pilar about opposing him, he plays a tape that has been edited to indict both her and Sinclair and which will exonerate Richard. Richard also obtains a warrant ordering Angela into custody for a psychiatric evaluation to determine her mental competency.

As Angela's competency hearing proceeds, it becomes obvious that her case is weak, and Maggie's reputation begins to slide because of rumors about her relationship with Tommy. When Frank discovers that the feud between the Agrettis and the Giobertis had begun when the title to Falcon Crest changed hands during a crooked card game, he tries to convince Nick to let sleeping dogs lie. After selling some of her recently acquired Glenbraddoch stock to Lance, Pilar proposes to establish a trauma center in the Ortega name, with her terms including banishment for everyone involved in Gabriel's case. When the court declares Angela mentally incompetent, Angela rocks the court with a startling revelation.

Having successfully frustrated Richard's plans by marrying Frank Agretti, Angela returns to Falcon Crest, where her family rallies to her side and plans are devised for Richard's total downfall. When Samantha returns to Chicago from Paris, Richard tells her to forget their association or she will have to pay consequences. Nonetheless, when Samantha arrives at Falcon Crest, she provides evidence that Richard was involved in Angela's kidnapping. Consequently, Pilar and Angela work with the S.E.C. to facilitate Richard's financial ruin.