Another golfer takes your ball?

It happened to my friend on hole #4 on the west course at the Canadian. For any of you who know the hole it is a sharp dogleg where you can either hit it straight to the fairway and then have about 160-200 yards to the hole. Or you can try to thread the needle between the tree and forest and put yourself about 140-160 years to the hole.
Anyway I decide to go in between the tree and forest with my 5 woods and I hit a nice straight one and hit the fairway. My friend who isn't very good at golf takes his driver out and smacks it high and far, it was probably the biggest drive I've ever seen by him. He slices big time and I thought it was gone into the forest. We walk up and we see his ball right infront of the green which was unbelievable. The people infront of us pick up the ball and flash us the finger and tell us to yell "fore" next time or there going to tell the marshall to kick us off the course.

In this situation what would he do? It was an unbelievable shot so I let him drop it right where they took the ball with no stroke penalty. He ended up birdieing it:)

What you did is correct according to the Rules.