tha dagger you find with the name heartseeker is used in a quest where the owner of the dagger, penumbra wants to get it back. if you want that quest you'l have to first find penumbra in the cellars beneath the ducal inn. then speak to the man who guards the prison where penumbra is, talk to him so that you really piss him of and then walk out of the room. he will then go away and you can now free penumbra, she will now go to that house where (if you have completed that quest) killed the demon.
