In many ways Alice Pyncheon is Phoebe's double in the Pyncheon family history. She is a lovely young girl, the great-granddaughter of Colonel Pyncheon, who does her best to cheer up the gloomy House of the Seven Gables. She throws a handful of rose seeds into the air and they take root and begin to bloom in the roof of the house. The whole neighborhood knows these flowers as Alice's Posies, and they are about the only cheerful thing about the House of the Seven Gables. She also brings a harpsichord back from Europe to play music. The novel ends with her happy spirit playing a few notes to send Clifford, Hepzibah, and Phoebe off to their joyous futures.
There is a legend about the fate of Alice Pyncheon that Mr. Holgrave writes up in a short story for publication. He reads this tale to Phoebe. In many ways, it contains in miniature the themes of the whole novel. In this story ("Alice Pyncheon," Chapter 13), what stops Alice Pyncheon from living a long and happy life is the interference of two men: her father, Gervayse Pyncheon, and Matthew Maule II.
Gervayse Pyncheon is the grandson of Colonel Pyncheon. He doesn't love the House of the Seven Gables, but he returns from Europe to take possession of it because it's his. He is a proud, greedy man rather like his grandfather. Gervayse is desperate to find the lost deed to Colonel Pyncheon's lands in Maine. He is so desperate, in fact, that he orders Matthew Maule's grandson Matthew (whom we call Matthew Maule II for clarity's sake) to come to the House of the Seven Gables. He offers this man money to show the way to the hidden deed.
Matthew Maule II wants to teach Gervayse a lesson. He also thinks Alice is stuck-up and wants to bring her down a notch. (Little does Matthew Maule II know that, when Alice first walks into her father's study and finds him standing there, she thinks he's a hottie (13.52).) So Matthew Maule II agrees to show Gervayse the hidden deed on one condition: he wants the House of the Seven Gables. Gervayse agrees – after all, lots and lots of land is worth more than one moldy house. Matthew Maule II adds another condition: he is going to need Alice Pyncheon's help.
Gervayse II has a moment's hesitation about using Alice to find the hidden deed, but he gets over it. He really wants that land. So he turns his back and lets Maule hypnotize Alice. Maule exclaims: "She is mine! [...] Mine by right of the strongest spirit!" (13.84). He asks his ancestors where the deed is, but the spirit of his grandfather prevents Alice from saying anything, so Gervayse doesn't get anything out of this whole disaster.
After putting Alice Pyncheon under hypnosis, Matthew Maule II can make her do anything he wants – laugh during funerals, cry during church, anything that amuses him. He so humiliates Alice that she wanders out into the cold and catches a fever that kills her. Maule attends her funeral in a fury: he is angry because he "meant to humble Alice, not to kill her" (13.84).
Obviously Alice's ending is sad while Phoebe's is happy. Like Phoebe, Alice is a Pyncheon woman who was raised outside the House of the Seven Gables. She returns to the house and tries to brighten it up. Unlike Phoebe, Alice becomes a victim of the Pyncheon curse. Her father Gervayse falls prey to the Pyncheon greed, which leads him to "[sell his] daughter for the mere hope of getting a sheet of yellow parchment into [his] clutch" (13.81). Also unlike Phoebe, Alice becomes a victim of the darker side of the Maule family – of Matthew Maule II's vengeful rage. If Judge Pyncheon had been just a little bit more interested in Phoebe, or if Mr. Holgrave had been just a little bit more power-hungry, Phoebe might have gone the way of Alice Pyncheon.