Exposition: Ivan always walked past the cemetery to get to his shack on the other side ,but never went through the cemetery even though it would save him some time. Since he never went through the cemetery the whole town called him "Pigeon" or "Ivan the Terrible".
Conflict: Lieutenant and Ivan were talking and Lieutenant dared Ivan to go through the cemetery and stick a saber in the ground and if he did then he would have five gold rubles.
"Here Ivan. When you get to the center of the cemetery, in front of the biggest tomb, stick the saber into the ground. In the morning we shall go there. And if the saber is in the groundfive gold rubles to you!"