His family watched in disbelief as Spencer pulled the emergency lever.
"I just panicked and pulled," he said.
The train stopped about 700m from where he dropped the phone, and staff undertook a quick but unsuccessful search, before saying they would look for it on the return trip.
Spencer said he did not expect to see his phone again, but to his amazement, an eagle-eyed staff member spotted it on the return journey. It was presented undamaged to Spencer, amid applause from his fellow passengers.
"I was very happy," he said.
Taieri Gorge Railway chief executive Murray Bond said using the train's emergency lever was "not encouraged ... usually only in the event of a disaster".
"Not the sort of thing we encourage, but this worked out nicely.
"That is the spirit of Taieri Gorge Railway; that we do things other companies won't necessarily do."