If I hadn't seen it with my own two eyes.....

I played a round of golf Saturday at this swanky resort in Scottsdale, AZ with my brothers and a buddy. My buddy hit an approach shot that landed on the green but rolled off the other side, as we were rolling up in the cart we saw a coyote trot across from the scrub on our left. He goes and picks up my buddy's ball and takes it up into the rocks at the base of the mountain and starts chewing on it. I guess he decided It didn't taste too good  so he dropped it and went a little further up into the rocks. My buddy goes up there and picks up his ball and brings It back down. So the question is does he have to take a penalty or can he play it from where the coyote picked it up?

No penalty. Spot the ball at the last known location before the animal grab it!!

I say you should always carry a gun when in coyote territory, shoot the coyote, cut off his balls and play a round or two with them!!

rule 18, page 13 of USGA. I know Jack about golf.