Sedgwick is incarcerated for a "brutal assault" on a "Defender of the Realm" in a "time of war". Regardless of the actual merits of the case, Sedge is a commoner and Roche is a noble, so Sedge loses. This almost certainly means death or a lifetime of hard labor for Sedge. Roche has not filed formal charges yet, he's in and out of consciousness, but he has verified the guards' story. (That story being "Sedge made rude and inflammatory gestures toward a Lord of the Realm. When instructed to stand down, he took an aggressive stance toward a Lord of the Realm. Lord Roche moved to "pacify" the prisoner and was injured in the struggle.")
The rest of you are "guests" of the Earl of Rothwyr. While there are no formal charges against you, you have repeatedly lied to the Earl about who you are and why you are passing into Kardia through Shadowyrd Pass. He is disinclined to acquiesce to allowing your departure. Oddly, his simplest and most obvious solution is to throw you in a dungeon for a few months until things sort themselves out. Why he's still talking to you is anyone's guess.
Horace has stirred up some trouble while trying to defend Eriola's story by insisting that an impossible thing is true (Mythril can tarnish and Eriola's ring is Mythril). Unfortunately, he has piqued the interest of Earl Rothwyr's pet guild wizard, Umberland.
You have been escorted back to your "guest" apartments for the night following dinner with the Earl.
Game tonight at 6pm.