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A man named Jack, a mysterious and frightening figure, holds a bloody knife. He has already murdered a mother, father, and young daughter in the middle of the night, and his final target is a baby boy whose room is at the top of the house. As he walks up the stairs to the boy’s room, he wipes the blood off his knife with a handkerchief. As he is about to plunge his blade into the boy’s crib, he finds a teddy bear in his place. Jack sniffs the air to trace the child and proceeds out of the house and up the hill.
Earlier that evening, the baby boy had maneuvered himself out of his crib, got down the stairs, and exited the house, moving hurriedly up the hill to the graveyard at the top. Mr. and Mrs. Owens, ghosts of the graveyard who have been dead for hundreds of years, inspect the child quizzically. Suddenly they hear Jack rattling the cemetery gates, trying to get in. At first Mr. and Mrs. Owens assume he is the child’s parent, but are surprised when a flickering figure appears, accompanied by two other figures, and tells them to protect their son. Mrs. Owens realizes the panicked flickering figure is the baby boy’s dead mother. Caius Pompeius, a two thousand-year-old Roman ghost, asks the mother and two other figures if they are buried in the graveyard. Mr. Owens suspects that they are freshly dead.
Mr. and Mrs. Owens, who always wanted to have a child of their own, decide to take the boy, even though he is living and they are dead. They cover him with their ghost-bodies so all Jack can see is a mist. Jack, confused, begins calling out for the boy, when a tall, dark stranger encounters Jack and questions his motives for being in a locked graveyard in the middle of the night. The stranger escorts Jack from the graveyard and goes to find the ghosts who are discussing what to do with the child.
Josiah Worthington, a ghost who was a wealthy politician in life, does not believe they should take the boy in. Caius Pompeius makes the point that they won’t be able to feed him. Mother Slaughter asks about where he will live. Mrs. Owens suggests that they give the boy the “Freedom of the Graveyard.” The stranger, whose name is Silas, agrees. Silas, who is neither living nor dead and has also been given the Freedom of the Graveyard, will be the child’s guardian, while Mr. and Mrs. Owens will be the child’s parents. They name the child Nobody Owens and continue to discuss what to do with him well into the morning.
As daybreak approaches, The Lady on the Grey appears, and all the graveyard folk recognize her as the one they encountered at their deaths. The Lady on the Grey admonishes the ghosts to be charitable, which convinces them to keep Nobody and give him the Freedom of the Graveyard. Silas goes to Nobody’s old house and inspects the bodies of his dead family. Meanwhile, Jack is at the town at the bottom of the hill, and he grows angry that he failed to kill Nobody. He decides not to tell the Convocation about his failure. Jack walks off when he hears sirens.
The novel centers around the nature of good and evil through the motif of life and death. Though the chapter opens with the murder of Nobody’s family, the action is focused on Nobody’s ironic survival due to his adoption by the inhabitants of the graveyard. The narrative contradicts the ordinary understanding of what the dead and the undead are like. The ghosts and undead do not become evil or menacing simply because they have passed from life into death. Mrs. Owens’ compassion toward Nobody (Bod) and his recently deceased mother offers the first of many examples of how the personalities of the dead continue as they were in life. Silas feels benevolently toward Bod’s plight, despite being a vampire, and it is he who introduces the question of whether Bod’s adoption by the Owenses is for good or for evil. Silas clearly chooses to act in favor of good. The Lady on the Grey, a personification of death, is a calm, kind authoritative figure who is respected by the inhabitants of the graveyard. The narrative continually questions the conventional understanding of good and evil, extrapolating that both are available to all, living person, ghost, or undead, as a choice.
The main setting of the story, the graveyard, sets an ironic tone for the story from the outset. The fact that Bod is driven to a place of death because his family has been murdered and a murderer is after him is ironic. It is also ironic that the dead and undead choose to protect a living boy, while the only living adult in the chapter intends to kill him. The diverse inhabitants of the graveyard debate whether to keep Bod, highlighting the fact that death is the great equalizer, and the narration even calls attention to the unusual democratic nature of the discussion. Even Bod’s full name, Nobody Owens, is tinged with irony as he is clearly important enough for a murderer to be after him and important enough for the inhabitants of the graveyard to decide to protect him. Though a graveyard is usually a creepy or scary place, for Bod it is ironically a place of safety and eventually, community.