sold a transmission now having buyer problems

This is exactly why I don't sell things.
You can't count on anyone to not ruin it and want thier money back.

If they replaced the seals, fluid and filter (At the very least) and it crapped out, then ok.
Otherwise F'm
Unfortunatly, you probably won't get the truth because you know $120 is worth lying over for some people.
The shop put it in, and he drove it away. Done deal.
ANY reputable shop would insist on new seals, pump bushing, fluid and filter or they wouldn't put it in.
And they would certainly NOT put it in if it had water in it.
Not without a complete disclaimer of liability.
A fluid leak after the fact is not your problem.