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Mrs. Mavilda suffered permanent brain damage from the lightning strike
One of the movie's more...erm...famous scenes is the ending one where Mrs. Mavilda gets struck by lightning, apparently by the tree she intended to cut down or Santa Claus, who shows up moments later and performs magic with a very lightning-like crackle. She obviously survives, as this is a family movie, and is stated to have performed a Heel–Face Turn and gone back to work at the orphanage as Judy's assistant. However, after the lightning strike, Mrs. Mavilda doesn't seem to be all there. She's seen staggering out from behind the house, and when Judy offers her the job, she only responds with a vacant-looking smile.

Mrs. Mavilda died from the lightning strike
Santa's lightning bolt caused her brain to stop working, and she fell unconscious, so her friends dragged her body behind the house and attempted CPR to no avail. The ending where she performed a Heel–Face Turn and went back to work at the orphanage as Judy's assistant was her dying last thoughts.

The special is intentionally terrible and is actually a parody.
Laid out in full here.

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