La solución estaba en quitar el select="selected" del primer valor dejandolo de esta manera
Código PHP:
Ver original<select name="relationship" id="relationship" class="select_mid">
<option value="" disabled="disabled">Seleccione</option>
<option
<?php if(isset($nonfamilyreference['relationship'])&&($nonfamilyreference['relationship'] == "Amigo")){?> selected="selected"
<?php }?> value="Amigo" >Amigo</option>
<option
<?php if(isset($nonfamilyreference['relationship'])&&($nonfamilyreference['relationship'] == "Conocido")){?> selected="selected"
<?php }?> value="Conocido" >Conocido</option>
</select>