mercurial/merge.py

--- a/mercurial/merge.py	Sun Nov 23 23:10:34 2014 -0800
+++ b/mercurial/merge.py	Mon Nov 24 09:50:27 2014 -0800
@@ -896,9 +896,6 @@
     # directory rename, move local
     for f, args, msg in actions['dm']:
         f0, flag = args
-        if f0 not in repo.dirstate:
-            # untracked file moved
-            continue
         if branchmerge:
             repo.dirstate.add(f)
             repo.dirstate.remove(f0)