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Philip "Phil" Pearce, a builder, left his wife, Lesley, and young daughter, Diane, to move with Sandie Merrick into Mill Cottage. The Mill had been converted into a flat by the company that Phil had just formed with Joe Sugden. Phil and Sandie started an affair which was unveiled by Diane when she found out, to a packed audience in The Woolpack. Sandie's affair caused another village scandal, and Annie Sugden made clear her disapproval. Sandie became pregnant and Phil was excited to become a father again, but Sandie felt the relationship had hit a wall. Phil was devastated when she suffered a miscarriage in March 1988, and this began the end of their relationship. In May 1988, whilst working on the renovations of Crossgill Farm, Phil carelessly left rags lying around, which caught alight, causing an explosion which trapped Annie Sugden in one of the upstairs rooms. Phil managed to save Annie but the house was gutted by the fire. Phil began believing Stephen Fuller was seducing Sandie in June 1988 and viciously attacked him. The final nail in the coffin in Phil and Sandie's relationship was when Sandie discovered Phil had gotten involved in dodgy dealings with Eric Pollard. She broke up with him and Phil was arrested in January 1989.

In May 1988, Phil was accidentally responsible for the incineration of Crossgill's farmhouse by burning old rags indoors. In January 1989 he was jailed for his involvement with an antiques fraud organised by Eric Pollard, and was never seen in the village again.

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