Mr. Cat commits suicide, but he is fine in the next scene; the show has confirmed that Cats Have Nine Lives, so dying once didn't actually kill him.
Smileyland's number one rule is "have fun" and not "don't hurt Quack Quack"; Quack Quack is a specific individual, not a part of the land itself, so it wouldn't make sense to have a law centered around a specific resident who could just leave at any time.
Fridge Horror
Prior episodes have shown Mr. Cat to engage in self-destructive behavior, and this one suggests that he might have suicidal tendencies.
The fact that Mr. Cat thought it was okay to off himself for such a trivial reason.
