To reproduce:

1. In a new project, create animator controller
2. Create new sub state machine
3. Move into the new sub state machine
4. Create 2 new sub state machines
5. Create Empty state
6. Move Empty state and one of the sub state machines into the other sub state machine
7. DO NOT DESELECT ANYTHING
8. Move sub state machine to Base Layer
9. Observe the console

Expected: No errors are thrown and controller is not permanently broken
Actual: Errors are thrown and Animator Controller is permanently broken

Reproduced in 5.5.0f3, 5.5.1f1, 5.5.2f1, 5.6.0f3, 2017.1.0a6