We had taken shelter with the farmer, hiding in the loft in his barn, before any of the Duke’s men arrived in the town. There was a local sheriff, but we avoided him and he would not have known us anyway. The bit you added about the Duke’s men threatening the farmer didn’t happen. No further checks were called for, no further information was shared beyond that the Duke’s men arrived in town and went to the Inn.
I would have no problem if there were relevant factors that changed the outcome in some way. If play continued, with more information, more rolls, and so on. But that’s not what happened. Instead, the GM decided that we were discovered somehow (but didn’t specify how), and in the morning the Duke’s men had surrounded the farm and called out for our surrender.
When I talked to the GM afterward, he said he thought it would be cool to have a scene like the end of “Young Guns” where the heroes are trapped in a burning farmhouse surrounded by enemies. He felt that granting us a long rest was sufficient reward for my use of the Folk Hero ability.
Ultimately, he had an idea about the way things should go, and so that’s how they went. His conception of the fiction won out.