The short answer to your question is, yes, a sideways mounted engine will cause a slight lateral imbalance in the plane. This imbalance should be corrected by adding weight to the opposite wing. But you have to laterally balance any plane, whether it has a side or upright mounted engine.

The additional amount of weight needed to offset the side mounted engine is not as much as you would think. The distance that the engine CG is offset from the thrustline is many times less than the distance from the counterweights on the wingtips to the thrustline.

Even if the plane was slight imbalanced, I doubt it caused your friend's plane to crash. You can use aileron trim to temporarily counteract a lateral imbalance.

To summarize, don't worry about it. Side mount the engine and laterally balance your plane when you're done.