A recent fire has burnt the hills. Timmy and Lassie view the devastation. A ranger pulls up on the road beside Timmy. Lassie spies a wild colt among the embers. Timmy and the ranger rush forward and capture the colt. Timmy is thrilled to have a wild colt all his own but the ranger tells him the colt is county property and will be disposed of at public auction.
At home, Timmy tells his mother about the colt. He plans to bid on the colt and counts his money. He has $11.50. His mother discourages him but then decides her son is old enough to conduct a business transaction.
At the sheriff's office, Ed Washburne and Sheriff Miller talk. Timmy enters and asks about the colt. He wonders what the colt will bring. The Sheriff tells him anywhere from $5 to $100.00. Ed tells him the cost will depend on how strongly someone wants the colt. Timmy leaves disappointed. He will loose the colt if someone outbids him.
At the auction, Timmy is outbid. The bidding continues. Ed tells Timmy he'll buy the colt if Timmy will tend it. Timmy readily agrees. Ed wins the colt for $40 and names him Square Deal. Ed and Timmy are now partners.
On his way home with the colt, Timmy is confronted by the colt's mother. The colt tries to rejoin his mother. Timmy tightens his grip on the rope about the colt's neck. Lassie frightens the mother away. Timmy fails to realize that the mare is the colt's mother and he wonders "what she wanted."
In the corral at the Martin farm the next day, Ed watches Timmy and the colt. Ruth joins them to watch the colt. Ed leaves to make a delivery. Timmy, Ruth, and Lassie stay at the fence to admire the colt.
That night, the mare appears in the barnyard. She frantically paces back and forth between the barn doors calling her colt. Lassie wakes Timmy. Timmy peers out his window and sees the mare. Ruth enters the room. She explains that the mare is probably the colt's mother. Timmy returns to bed anxiously. Ruth assures him the colt has a fine home and will forget he had any other.
The next day,Timmy tends the colt in the pasture. The colt won't eat. Ed drives up. Timmy suggests quietly that the colt may be lonely for his mother. Ed assures Timmy the colt has a fine home. That night, Timmy is wide awake in his bed, unable to sleep.
The mare is seen running about the devastated hills. She nears the fence on the Martin land and calls her colt. Timmy realizes he can't force the colt to stay with him and lowers the bars on the fence. The colt runs to his mother. Timmy waves good-bye as the mare and her colt run together into the hills. Timmy goes home saddened by the loss of the colt.
In town, Timmy faces Ed. With a serious and saddened tone, Timmy tells Ed that Square Deal's mother had been visiting the farm and that Square Deal broke loose to join his mother. Timmy admits he let it happen. Ed says that Timmy has heart and understands how he feels. Ed tells Timmy he can repay him for the loss of the colt by finding homes for a litter of pups. Timmy brightens, realizing Ed holds no hard feelings and still likes and trusts him. Timmy and Ed are now "partners" in finding a litter of puppies their very own homes!
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