So I decided to play Oblivion again after doing everything of importance in Skyrim and I was playing the Mage Guild Recommendation questline.

I was on the Anvil one where I have to track down and be bait for a rogue mage. She jumped out my allies and I killed her but then an Imperial Guard showed up.

Apparently killing a mage turned bandit is illegal and my allies got into a fight with the guard. They both died (I got some really nice armor) and I got a 50 gold fine.

Guess you attacked her before she turned aggresive

This actually happens more often than you might expect. If I recall it finally got fixed in the UOP, but you'll still encounter it if you're on console if there's a legion member nearby when the battlemages attack.

Once, i was approaching the attack area when I saw a guard fighting some deadra there. There was a gate nearby. So, I go to help the guard, and the mage still does her scripted thing. It was total mayhem. LOL.