I'd say "Yo estaba en la tienda cuando vi a mi amiga"
"estaba" because you're describing the situation and "vi" because it's the action that happened.
This is testing my memory
Yo estuve, Vd estaba are from 'estar'/ to be (temporarily)
eg. Estuve en la tienda cuando vi a mi amiga - I was in the shop when I saw my (girl) friend. Estar/estuve indicate a temporary time, and location.
Era, indicates a permanent state.
...todo paso cuando (yo) era pequen~o It all happened when I was young, (I was young for several years, not temporarily).
I forget some of the other words, or my confusion will teach you wrongly.