Harvey, the arrogant and spoiled son of an indulgent absentee-father, falls overboard from a transatlantic steamship and is rescued by a fishing vessel on the Grand Banks. Harvey fails to persuade them to take him ashore, nor convince the crew of his wealth. The captain offers him a low-paid job, until they return to port, as part of the crew that turns him into a mature, considerate young man.
At an orphanage, the children are sad because they received used defective toys as gifts. Professor Grampy sees the children while passing by in his sled and has an idea on how to give them a merry Christmas.
An American boy turns out to be the heir of a wealthy British earl. He is sent to live with the irritable and unsentimental aristocrat, his grandfather.
Ollie Dee and Stannie Dum try to borrow money from their employer, the toymaker, to pay off the mortgage on Mother Peep's shoe and keep it and Little Bo Peep from the clutches of the evil Barnaby. When that fails, they trick Barnaby, enraging him.