Jacob was a man from Fox Hollow who, in 1275, came across a bleeding tree while working. As one who loved fairy tales, he instantly knew the tree must be Daphne, a woman who was said to have turned into a tree over her longing for her love, Gareth, to return.
If Geralt threatens the witch: Daphne's soul, released by the Witch of Lynx Crag, possessed the first living thing nearby which happened to be Jacob's dog, Morholt. Filled with pain and rage, she then attacked and killed Jacob. Geralt soon found the possessed dog and was forced to kill Morholt.
If Geralt asks the witch politely and does it himself: Jacob and Morholt both survived.