Emacs unexpectedly deletes edited file

1. Open file, setting coding system as follows:
        (setq  save-buffer-coding-system 'windows-1252) ;; windows only

2. Load a file containing \235 character.

3. Modify file and type Ctrl-X Ctrl-S.

4. Get error message buffer that begins: "These default coding systems 
   were tried to encode text ..."

5. Get minibuffer message: "Select coding system (default raw-text): "

6. Decide you don't want to save, click "X" to close emacs.

7. Discover that the entire file has been deleted (though a recovery
   file was saved).