--- a/mercurial/merge.py	Sun Nov 08 10:24:18 2009 -0600
+++ b/mercurial/merge.py	Sun Nov 08 10:29:52 2009 -0600
@@ -167,14 +167,15 @@
     m1, m2, ma = p1.manifest(), p2.manifest(), pa.manifest()
     copied = set(copy.values())
 
+    if not overwrite and '.hgsubstate' in m1:
+        # check whether sub state is modified
+        for s in p1.substate:
+            if p1.sub(s).dirty():
+                m1['.hgsubstate'] += "+"
+                break
+
     # Compare manifests
     for f, n in m1.iteritems():
-        if f == '.hgsubstate':
-            # check whether sub state is modified
-            for s in p1.substate:
-                if p1.sub(s).dirty():
-                    n += "+"
-                    break
         if partial and not partial(f):
             continue
         if f in m2: