Odd error, but not sure if this is just when you do stuff from the Web interface (because I only use it this way), but here you go:
I have Transmission-daemon running on Ubuntu Server 14.04; I control it with the web interface. I have it setup to store everything in "/Downloads/Complete", but put incomplete torrents in "/Downloads/Incomplete".
Normally, I add torrents, and they show up in the "Incomplete" folder until they're done, then they go to the right spot (as expected). However, if you start a torrent with the web interface (so the files start downloading), then edit which files you want to download (double click the torrent, unclick the files you don't want), once you change which files you want to get, it will then move everything into the "Complete" folder (essentially ignoring the "save incomplete files to here" rule), even if they're not complete.
It's possible this happens only if you untick everything (which is what I was doing), then re-pick the ones you want.
Not sure if this is clear.