Before the encounter with the Ratking, the npcs will tell you that the rats are being used to track down the hidden villagers. I assume that cat has told you the same thing.
So if you want to keep them save, you can either help the cat vs the rats or clear the path for the villagers so that they can escape through the teleporter.
Not sure what your friend expected to happen when he sided with the evil Ratking/Orks.
