On New Year’s Eve, Danny surprised Phyllis by proposing marriage and she quickly accepted. Chris and Paul received news from the police department that they were closing the two-year investigation on their hit and run accident, which made Phyllis feel everything was coming up roses. However, in a New York hospital, Sasha vowed revenge against Phyllis. Arriving in Genoa City, Sasha informed Phyllis that her relationship to Peter was over and demanded $20,000 to start a new life, or she’d expose the truth about Phyllis’ blood test switch in New York to make it appear as though Danny were Daniel’s biological father. A meeting between Sasha and Chris set both Chris and Paul on a quest for the truth about Phyllis. Meanwhile, a fearful Phyllis hocked personal possessions — even her engagement ring — until she finally persuaded Dr. Tim Reid to loan her the money to payoff Sasha. But for insurance, Sasha distributed copies to various people of the manuscript detailing Phyllis’ scheme against Danny, but Sasha ended up killed in a fire in her hotel room. Despite having only circumstantial evidence, Chris and Paul were able to plant enough doubt in Danny’s mind that he got second blood tests done. Danny was furious when paternity tests revealed he wasn’t Daniel’s father. During Phyllis’ confession, Danny was almost brought to violence when he raised his hand to strike Phyllis. He immediately made plans to divorce Phyllis but also sought custody of Daniel, a boy he’d grown to love as his own. Chris agreed to represent him.
Christine was horrified to learn that her old nemesis, Michael Baldwin, was up for parole. Despite Chris’ impassioned plea to keep Baldwin in prison at his parole hearing, Baldwin was released. He landed a job as a paralegal at the law firm that ended up representing Phyllis in her divorce and custody trial. Shortly after taking the job, Baldwin and Phyllis became personally involved. To help Danny in his custody case for Daniel, Chris and Paul retraced their previous steps in an effort to gather concrete proof. They learned that Brian Hamilton was really Daniel’s father. Angered by Phyllis’ dirty tricks, Brian agreed to testify on Danny’s behalf. Even as Danny became upset when he discovered that Phyllis and Michael were lovers, Danny and Chris grew closer as they worked together to prepare for the custody trial. The mounting evidence against Phyllis prompted Danny to realize she drugged him and that they had never made love while he was still married to Chris. When Danny broke the news to Chris, she waited until he left before breaking down in tears. The end of year saw the divorce and custody trial still being played out. And, Chris and Paul sharing a romantic “vacation” in their home.
Jack proposed marriage to Diane and she accepted. Soon after, in an effort to mend the rift between Jack and Victor, Diane began accepting dinner invitations from Victor. When Victor offered Diane a new assignment, designing the new Newman Towers, she heeded his request to keep the project a secret. When Jack discovered that Diane was seeing Victor behind his back, he confronted her. Feeling distrusted by Jack, Diane returned his ring and canceled their engagement. Shortly after, she and Victor’s relationship heated up. Victor surprised Diane by arranging their wedding ceremony in Las Vegas. Upon their return to Genoa City, Diane felt overwhelmed by her new life as Victor Newman’s wife. Meanwhile, Victor arranged a party to celebrate his marriage to Diane. Jack surprised everyone by crashing the party and making a classy toast to the bride and groom. Alone with Victor, Jack suggested that Diane still had feelings for him. Diane confided to Jack that she desperately wanted to have a baby with Victor. Jack urged Diane to tell Victor. But when Diane broached the conversation with Victor, he announced that he had just had a vasectomy. Diane later learned that the vasectomy was suggested by Nikki, and Diane vowed revenge against Victor’s previous wife. During the Christmas holidays, Diane took ill and was rushed to the hospital. Nikki accused Diane of faking the illness in order to get out of going to the ranch, which infuriated Victor. A doctor informed Diane that she suffered from a bleeding ulcer.
Newcomer Kurt Costner opened up to Ashley and Hope about his past and revealed that he had a wife and daughter who were killed in a car accident. In Cape Cod, Ashley found a letter from Kurt’s first wife that revealed her affair with another man, Grant, and that she was leaving Kurt for Grant. After some soul-searching, Ashley finally turned the letter over to Kurt. Kurt was crushed, but eventually he was able to put the tragedy behind him. Determined to move forward with his life, Kurt began romancing Ashley. Kurt also spent time at Victor’s penthouse with Hope while Victor was out of town and the two grew friendly. When Hope nearly choked, Kurt saved her life. He revealed he was a surgeon. Victor, who was thankful to Kurt, rewarded him with the money to open his own clinic. Hope volunteered to work at the clinic, and Kurt and Hope grew closer. Ashley pushed Kurt to choose between the two women, and was disappointed when Kurt decided he only wanted to be friends. Meanwhile, Hope, still living with Victor at the penthouse, felt betrayed when Victor married Diane without giving her any advance notice. Hope took Victor Jr. and left town with Kurt.
Behind Victor’s back, Jill and Jack closed a business deal with Keith Dennison. When Victor learned about the acquisition, he was livid. Making matters worse, Jack got Nick involved in the deal. Victor ordered Jack to pull out of the business arrangement, but Jack said the company was legally committed to it. Nick tried to make his father understand why the Dennison acquisition was a good thing for Newman Enterprises, but Victor refused to listen and said things about Nick’s involvement that hurt the young man. Finally accepting the deal, Victor told Jack he’d better make it a success. Smarting from his father’s accusations, Nick began to feel that he’d never be able to make his own mark at Newman Enterprises and decided to quit. After discussing the matter with Sharon, Nick revealed to his family that, after their baby was born, he and his wife were moving away from Genoa City. Nikki urged Sharon to stop Nick from leaving town. Overwhelmed by the pressure, Sharon hurried out into severe weather. During a snowstorm, she slipped on a patch of ice and became unconscious. To Nick’s horror, he found Sharon unconscious and desperately rushed to find help. Josh arranged for a helicopter to take Sharon to the hospital. At the hospital, Sharon went into premature labor. It was very much touch and go for both Sharon and the baby. Soon after, the baby, developed a serious lung problem and was rushed into surgery. Fortunately, the surgery for Nick and Sharon’s baby was successful. Soon after, Nick and Sharon named their son Noah. It was a happy day in Genoa City when the young couple were able to bring their baby home.
Meanwhile, Grace and Tony, who thought Noah had died, traveled to Madison and questioned Frank about his and Sharon’s child. After intense questioning from Grace, Frank broke down and gave her a legal document that he signed giving his consent to the adoption. Grace hoped that the document would give her and Tony clues regarding the adopted child’s whereabouts. Grace and Tony succeeded in finding the lawyer who handled the adoption. Unfortunately, he was a frail, old man who was in prison for arranging illegal adoptions. Grace pressed the lawyer, for information, but he didn’t volunteer anything. Later, he wrote Grace a note and died. The note led Grace and Tony to a woman named Alice Johnson. But when they arrived at Alice’s home, they met an old woman, Mildred, who told them Alice didn’t live there anymore. Tony and Grace lingered outside the house and spotted a six-year-old girl, Cassie, getting off a bus and go into Mildred’s home. Grace and Tony confronted Mildred, who admitted she’s been raising Cassie. Grace told Mildred that she was a friend of Cassie’s natural mother and that her newborn baby just died. Grace pleaded with Mildred to reunite Cassie with her real mom and Mildred agreed to consider it. Grace and Tony persuaded Cassie to accompany them on a trip to Genoa City, where they promised she’d meet some new friends. Back in Genoa City, Grace and Tony were surprised to learn that Noah was still alive. They quickly decided to postpone telling Sharon about Cassie.
Meanwhile, Nick flew to Seattle to interview for a job, but learned the prospective employers was only interested in hiring him because he was Victor Newman’s son. Nick decided against leaving Genoa City and completed his college finals. When Sharon caught a cold the same night Nick was out celebrating his graduation, Grace offered to stay the night and babysit Noah. Grace fell asleep in Noah’s room, where she was caring for him. After a night of drinking with his college pals, Nick returned home late. He stopped by the nursery to check on Noah, and saw whom he believed was Sharon asleep in the room. Nick made passionate love to the woman in the bed. Nick had a shock when he later climbed into his own bed — only to find Sharon! The next day, Nick learned from Sharon that Grace had spent the night. Nick wrestled with Grace and his conscious on whether to tell Sharon or not. Nick became more worried about his marriage to Sharon after he returned to work at Newman Enterprises and discovered Victor had also given Grace a job. Eventually, Nick became convinced that Grace meant him no harm. Grace led Sharon to believe that she and Tony were a couple. With an ulterior motive in mind, Grace asked Tony to marry her. When Grace announced the news to Sharon, she offered to pay for Grace and Tony’s wedding. Grace had became so attached to Cassie that she decided she wanted to leave town with the little girl. Upset by Grace’s plan, Tony tried to pressure Grace into changing her mind and turn Cassie over to Sharon.
Jill moved out of the Abbott house and temporarily moved in with Keith Dennison and his daughters, Tricia and Megan. Billie was sent off to boarding school.
At a mental hospital, in another part of the country, Josh’s presumed-dead wife Veronica recognized a picture of Josh in a newspaper. Determined to reunite with Josh, Veronica escaped from the mental institution and was struck by a car. She suffered extensive damage to her face and had to have plastic surgery. When the bandages were removed from Veronica’s face, she was surprised to discover that the surgery had dramatically altered her features. Veronica slipped out of the hospital, wearing a wig, and assumed a new identity as a woman named Sarah. Registering at an employment agency, Sarah soon landed a job as Nikki and Josh’s new housekeeper.
Upset that Nina was dissatisfied and insecure in her marriage, Ryan left with little Phillip. At Jabot, Victor awarded Ryan the “Brash and Sassy” campaign. Shortly after separating from Nina, Ryan became romantically involved with Tricia Dennison. Ryan suddenly broke off their budding romance, however, when he decided to give his marriage to Nina one more try. Tricia took her friend, Alec, up on his suggestion to try and make Ryan jealous. Meanwhile, Nina led Tricia to believe that she and Ryan had spent one night making love. Enraged, Tricia confronted Ryan and slapped his face. Angered by Nina’s lie, Ryan announced their marriage was over and moved out. Soon after, Ryan insisted to Tricia that he was finished with Nina and intended to get a divorce. AsTricia and Ryan were enjoying a passionate kiss, Ryan received a call from Flo, who announced that Nina was missing. Ryan phoned the police and they began searching for Nina. During the investigation, Phillip walked in on Tricia and Ryan kissing. Upset, Phillip blamed Tricia for his mother’s disappearance. Later, Ryan flew to St. Louis, where an unidentified woman matching Nina’s description was found dead. To Ryan’s relief, it wasn’t Nina. Meanwhile, Nina returned home and was furious to find Tricia in her apartment. During an argument, Nina pulled out a gun. Ryan arrived and tried to reason with Nina. She agreed to talk, provided Tricia leave. Alone with Nina, Ryan tried to console her. Instead, Nina held a gun to her head and threatened to pull the trigger. Worried for Nina’s safety, Ryan struggled to free the gun away from her. During the struggle, the gun went off and Nina was shot. While Nina was being operated on at the hospital, detectives questioned Ryan. Nina regained consciousness, but initially was unable to recall how she was shot. Later, Ryan was arrested by the police. Angered at her father and Jill’s efforts to undermine her romance with Ryan, Tricia moved out. Later, Ryan was released on bail. At the hospital, Ryan helped Nina to recall how she was shot. Tricia arrived at the hospital, saw Ryan and Nina in an embrace, and assumed they were back together. When the police learned that Nina had regained her memory, they accused Ryan of coercing Nina’s statement. Nina agreed to testify on Ryan’s behalf, enabling him to be exonerated. Later, Nina, after being released from the hospital, informed Tricia that she was free to pursue Ryan as Nina was stepping out of the picture. When Ryan tried to visit Phillip, the boy seemed uninterested in seeing him. Soon after, Nina asked Ryan for the key back to her apartment, then had Ryan served with divorce papers. Tricia was delighted to learn that Ryan and Nina were divorcing and pushed Ryan to move in together. But by that time, Ryan was already rooming with Neil. Jill criticized Nina for filing divorce against Ryan. Tricia miscalculated Nina’s mood when she stopped by her home to thank Nina for her move to divorce Ryan. Angered, Nina accused Tricia of being responsible for breaking up her marriage. After Christmas, Ryan and Tricia went on a skiing trip in Aspen, where Tricia lost her virginity to Ryan.
Neil inadvertently learned that Dru signed with a high profile modeling agency — against his wishes — which led to a split between the two. Having a change of heart, Neil told Dru he had been wrong and added he was interested in making their marriage work. To Dru’s surprise, Neil announced that he wanted them to have another child. But behind Neil’s back, Dru took birth control pills so that she could continue her modeling career. Neil was furious when he discovered that Dru had lied to him about trying to get pregnant. Unable to cope with this betrayal, Neil left Dru and accepted an offer from Ryan to share his apartment.
In helping Olivia deal with her feelings for her brother-in-law, Malcolm fell in love with the doctor. Soon after, Malcolm proposed marriage to Olivia, on bended knee,s and she accepted. To Malcolm and Olivia’s relief, little Nate was thrilled by the idea of Malcolm marrying Olivia. They made arrangements to marry immediately. Malcolm even managed to surprise Olivia when he made arrangements for Nate Jr. to join them on their honeymoon. Several months after their wedding, Malcolm surprised Olivia by announcing his desire to adopt Nate Junior.
Feeling backed into a corner, Victoria left town for awhile to sort out her life. Upset by his wife’s extended absence, Cole decided to move out, but changed his mind when Victoria suddenly returned home from Europe and seemed committed to saving their marriage. However, a few months later, Victoria suddenly left town again, this time for business reasons. Meanwhile, Ashley agreed to let Cole build his new novel around her. During the time spent together researching the book, Ashley and Cole became close and shared several kisses. Cole eventually confided to Ashley that he didn’t know how much longer he could accept Victoria’s extended absence. Victoria returned home unexpectedly and was surprised to see Cole and Ashley kissing through the window. Victoria separated from Cole and moved back into her old bedroom at Nikki’s home. Meanwhile, she and Ashley competed for Cole’s affections.
Katherine underwent a facial rejuvenation. Shortly after, she found herself set-up by Ashley on a blind date with John Abbott.