diff --git a/server/src/agents/merge/mod.rs b/server/src/agents/merge/mod.rs
index b9fbb4ae..2c017b43 100644
--- a/server/src/agents/merge/mod.rs
+++ b/server/src/agents/merge/mod.rs
@@ -2,7 +2,6 @@
 
 use serde::Serialize;
 
-mod conflicts;
 mod squash;
 
 pub(crate) use squash::run_squash_merge;
diff --git a/server/src/agents/merge/squash/mod.rs b/server/src/agents/merge/squash/mod.rs
index 665044e9..3b8405e3 100644
--- a/server/src/agents/merge/squash/mod.rs
+++ b/server/src/agents/merge/squash/mod.rs
@@ -6,7 +6,6 @@ use std::process::Command;
 use std::sync::Mutex;
 
 use super::super::gates::run_project_tests;
-use super::conflicts::try_resolve_conflicts;
 use super::{MergeReport, SquashMergeResult};
 use crate::config::ProjectConfig;
 
@@ -107,55 +106,28 @@ pub(crate) fn run_squash_merge(
     all_output.push_str(&merge_stderr);
     all_output.push('\n');
 
-    let mut had_conflicts = false;
-    let mut conflicts_resolved = false;
+    let conflicts_resolved = false;
     let mut conflict_details: Option<String> = None;
 
     if !merge.status.success() {
-        had_conflicts = true;
-        all_output.push_str("=== Conflicts detected, attempting auto-resolution ===\n");
-
-        // Try to automatically resolve simple conflicts.
-        match try_resolve_conflicts(&merge_wt_path) {
-            Ok((resolved, resolution_log)) => {
-                all_output.push_str(&resolution_log);
-                if resolved {
-                    conflicts_resolved = true;
-                    all_output.push_str("=== All conflicts resolved automatically ===\n");
-                } else {
-                    // Could not resolve — abort, clean up, and report.
-                    let details = format!(
-                        "Merge conflicts in branch '{branch}':\n{merge_stdout}{merge_stderr}\n{resolution_log}"
-                    );
-                    conflict_details = Some(details);
-                    all_output.push_str("=== Unresolvable conflicts, aborting merge ===\n");
-                    cleanup_merge_workspace(project_root, &merge_wt_path, &merge_branch);
-                    return Ok(SquashMergeResult {
-                        success: false,
-                        had_conflicts: true,
-                        conflicts_resolved: false,
-                        conflict_details,
-                        output: all_output,
-                        gates_passed: false,
-                    });
-                }
-            }
-            Err(e) => {
-                all_output.push_str(&format!("Auto-resolution error: {e}\n"));
-                cleanup_merge_workspace(project_root, &merge_wt_path, &merge_branch);
-                return Ok(SquashMergeResult {
-                    success: false,
-                    had_conflicts: true,
-                    conflicts_resolved: false,
-                    conflict_details: Some(format!(
-                        "Merge conflicts in branch '{branch}' (auto-resolution failed: {e}):\n{merge_stdout}{merge_stderr}"
-                    )),
-                    output: all_output,
-                    gates_passed: false,
-                });
-            }
-        }
+        all_output.push_str(
+            "=== Conflicts detected — aborting merge. Use `start_agent mergemaster` \
+             to invoke LLM-driven conflict resolution. ===\n",
+        );
+        let details =
+            format!("Merge conflicts in branch '{branch}':\n{merge_stdout}{merge_stderr}");
+        conflict_details = Some(details);
+        cleanup_merge_workspace(project_root, &merge_wt_path, &merge_branch);
+        return Ok(SquashMergeResult {
+            success: false,
+            had_conflicts: true,
+            conflicts_resolved,
+            conflict_details,
+            output: all_output,
+            gates_passed: false,
+        });
     }
+    let had_conflicts = false;
 
     // ── Commit in the temporary worktree ──────────────────────────
     all_output.push_str("=== git commit ===\n");
diff --git a/server/src/agents/merge/squash/tests_advanced.rs b/server/src/agents/merge/squash/tests_advanced.rs
index a2085a37..c0695ee1 100644
--- a/server/src/agents/merge/squash/tests_advanced.rs
+++ b/server/src/agents/merge/squash/tests_advanced.rs
@@ -144,15 +144,15 @@ async fn squash_merge_additive_conflict_both_additions_preserved() {
     // Squash-merge the feature branch — conflicts because both appended to the same location.
     let result = run_squash_merge(repo, "feature/story-238_additive", "238_additive").unwrap();
 
-    // Conflict must be detected and auto-resolved.
+    // Deterministic merge does NOT auto-resolve conflicts — AC3 requires failure.
     assert!(result.had_conflicts, "additive conflict should be detected");
     assert!(
-        result.conflicts_resolved,
-        "additive conflict must be auto-resolved; output:\n{}",
-        result.output
+        !result.conflicts_resolved,
+        "deterministic merge must NOT auto-resolve conflicts"
     );
+    assert!(!result.success, "conflict must cause merge failure");
 
-    // Master must contain both additions without conflict markers.
+    // Master must not have been modified (merge aborted).
     let content = fs::read_to_string(repo.join("module.rs")).unwrap();
     assert!(
         !content.contains("<<<<<<<"),
@@ -162,18 +162,6 @@ async fn squash_merge_additive_conflict_both_additions_preserved() {
         !content.contains(">>>>>>>"),
         "master must not contain conflict markers"
     );
-    assert!(
-        content.contains("feature_fn"),
-        "feature branch addition must be preserved on master"
-    );
-    assert!(
-        content.contains("master_fn"),
-        "master branch addition must be preserved on master"
-    );
-    assert!(
-        content.contains("existing"),
-        "original function must be preserved"
-    );
 
     // Cleanup: no leftover merge-queue branch or workspace.
     let branches = Command::new("git")
@@ -262,25 +250,22 @@ async fn squash_merge_conflict_resolved_but_gates_fail_reported_as_failure() {
         .output()
         .unwrap();
 
-    // Squash-merge: conflict detected → auto-resolved → quality gates run → fail.
+    // Squash-merge: conflict detected → aborted immediately (no gate run).
     let result = run_squash_merge(repo, "feature/story-238_gates_fail", "238_gates_fail").unwrap();
 
     assert!(result.had_conflicts, "conflict must be detected");
     assert!(
-        result.conflicts_resolved,
-        "additive conflict must be auto-resolved"
-    );
-    assert!(
-        !result.gates_passed,
-        "quality gates must fail (script/test exits 1)"
+        !result.conflicts_resolved,
+        "deterministic merge must NOT auto-resolve conflicts"
     );
+    // Merge is aborted at conflict detection; gates are never reached.
     assert!(
         !result.success,
-        "merge must be reported as failed when gates fail"
+        "conflicting merge must be reported as failed"
     );
     assert!(
         !result.output.is_empty(),
-        "output must contain gate failure details"
+        "output must contain conflict details"
     );
 
     // Master must NOT have been updated (cherry-pick was blocked by gate failure).
diff --git a/server/src/agents/pool/auto_assign/auto_assign.rs b/server/src/agents/pool/auto_assign/auto_assign.rs
index 602459f3..2592bb0c 100644
--- a/server/src/agents/pool/auto_assign/auto_assign.rs
+++ b/server/src/agents/pool/auto_assign/auto_assign.rs
@@ -83,10 +83,9 @@ impl AgentPool {
         };
 
         // Process each active pipeline stage in order.
-        let stages: [(&str, PipelineStage); 3] = [
+        let stages: [(&str, PipelineStage); 2] = [
             ("2_current", PipelineStage::Coder),
             ("3_qa", PipelineStage::Qa),
-            ("4_merge", PipelineStage::Mergemaster),
         ];
 
         for (stage_dir, stage) in &stages {
@@ -121,58 +120,6 @@ impl AgentPool {
                     continue;
                 }
 
-                // Skip stories in 4_merge/ that already have a reported merge failure.
-                // These need human intervention — auto-assigning a new mergemaster
-                // would just waste tokens on the same broken merge.
-                if *stage == PipelineStage::Mergemaster
-                    && has_merge_failure(project_root, stage_dir, story_id)
-                {
-                    continue;
-                }
-
-                // AC6: Detect empty-diff stories in 4_merge/ before starting a
-                // mergemaster. If the worktree has no commits on the feature branch,
-                // write a merge_failure and block the story immediately.
-                if *stage == PipelineStage::Mergemaster
-                    && let Some(wt_path) = worktree::find_worktree_path(project_root, story_id)
-                    && !crate::agents::gates::worktree_has_committed_work(&wt_path)
-                {
-                    slog_warn!(
-                        "[auto-assign] Story '{story_id}' in 4_merge/ has no commits \
-                         on feature branch. Writing merge_failure and blocking."
-                    );
-                    let empty_diff_reason = "Feature branch has no code changes — the coder agent \
-                         did not produce any commits.";
-                    // Write merge_failure and blocked to content store.
-                    if let Some(contents) = crate::db::read_content(story_id) {
-                        let updated = crate::io::story_metadata::write_merge_failure_in_content(
-                            &contents,
-                            empty_diff_reason,
-                        );
-                        let blocked = crate::io::story_metadata::write_blocked_in_content(&updated);
-                        crate::db::write_content(story_id, &blocked);
-                        crate::db::write_item_with_content(story_id, stage_dir, &blocked);
-                    } else {
-                        // Fallback: filesystem.
-                        let story_path = project_root
-                            .join(".huskies/work")
-                            .join(stage_dir)
-                            .join(format!("{story_id}.md"));
-                        let _ = crate::io::story_metadata::write_merge_failure(
-                            &story_path,
-                            empty_diff_reason,
-                        );
-                        let _ = crate::io::story_metadata::write_blocked(&story_path);
-                    }
-                    let _ = self
-                        .watcher_tx
-                        .send(crate::io::watcher::WatcherEvent::StoryBlocked {
-                            story_id: story_id.to_string(),
-                            reason: empty_diff_reason.to_string(),
-                        });
-                    continue;
-                }
-
                 // Re-acquire the lock on each iteration to see state changes
                 // from previous start_agent calls in the same pass.
                 let preferred_agent =
@@ -287,6 +234,114 @@ impl AgentPool {
                 }
             }
         }
+
+        // ── 4_merge: deterministic server-side merge (no LLM agent) ──────────
+        //
+        // Stories in 4_merge/ are handled directly by the server rather than by
+        // a mergemaster agent.  For each eligible story, trigger start_merge_agent_work
+        // which runs the squash-merge pipeline in a background task.  On success
+        // the story advances to 5_done automatically.  On failure merge_failure is
+        // written to the CRDT and a notification is emitted; the story stays in
+        // 4_merge/ until a human intervenes or an explicit `start_agent mergemaster`
+        // call invokes the LLM-driven recovery path.
+        let merge_items = scan_stage_items(project_root, "4_merge");
+        for story_id in &merge_items {
+            // Skip stories with an already-recorded merge failure — they need
+            // human intervention (operator can call start_agent mergemaster).
+            if has_merge_failure(project_root, "4_merge", story_id) {
+                continue;
+            }
+
+            if has_review_hold(project_root, "4_merge", story_id) {
+                continue;
+            }
+
+            if is_story_frozen(project_root, "4_merge", story_id) {
+                slog!("[auto-assign] Story '{story_id}' in 4_merge/ is frozen; skipping.");
+                continue;
+            }
+
+            if is_story_blocked(project_root, "4_merge", story_id) {
+                continue;
+            }
+
+            if has_unmet_dependencies(project_root, "4_merge", story_id) {
+                slog!("[auto-assign] Story '{story_id}' in 4_merge/ has unmet deps; skipping.");
+                continue;
+            }
+
+            // AC6: Detect empty-diff stories before starting the merge pipeline.
+            // If the worktree has no commits on the feature branch, write a
+            // merge_failure and block the story immediately — no merge job needed.
+            if let Some(wt_path) = worktree::find_worktree_path(project_root, story_id)
+                && !crate::agents::gates::worktree_has_committed_work(&wt_path)
+            {
+                slog_warn!(
+                    "[auto-assign] Story '{story_id}' in 4_merge/ has no commits \
+                     on feature branch. Writing merge_failure and blocking."
+                );
+                let empty_diff_reason = "Feature branch has no code changes — the coder agent \
+                     did not produce any commits.";
+                if let Some(contents) = crate::db::read_content(story_id) {
+                    let updated = crate::io::story_metadata::write_merge_failure_in_content(
+                        &contents,
+                        empty_diff_reason,
+                    );
+                    let blocked = crate::io::story_metadata::write_blocked_in_content(&updated);
+                    crate::db::write_content(story_id, &blocked);
+                    crate::db::write_item_with_content(story_id, "4_merge", &blocked);
+                } else {
+                    let story_path = project_root
+                        .join(".huskies/work/4_merge")
+                        .join(format!("{story_id}.md"));
+                    let _ = crate::io::story_metadata::write_merge_failure(
+                        &story_path,
+                        empty_diff_reason,
+                    );
+                    let _ = crate::io::story_metadata::write_blocked(&story_path);
+                }
+                let _ = self
+                    .watcher_tx
+                    .send(crate::io::watcher::WatcherEvent::StoryBlocked {
+                        story_id: story_id.to_string(),
+                        reason: empty_diff_reason.to_string(),
+                    });
+                continue;
+            }
+
+            // Skip if a merge job is already running for this story (e.g. triggered
+            // by a previous auto-assign pass or by pipeline advancement).
+            let already_running = self
+                .merge_jobs
+                .lock()
+                .ok()
+                .and_then(|jobs| jobs.get(story_id.as_str()).cloned())
+                .is_some_and(|job| {
+                    matches!(job.status, crate::agents::merge::MergeJobStatus::Running)
+                });
+            if already_running {
+                continue;
+            }
+
+            // Skip if an explicit mergemaster LLM agent is already running
+            // (operator-driven failure recovery path).
+            let has_mergemaster = {
+                let agents = match self.agents.lock() {
+                    Ok(a) => a,
+                    Err(e) => {
+                        slog_error!("[auto-assign] Failed to lock agents: {e}");
+                        break;
+                    }
+                };
+                is_story_assigned_for_stage(&config, &agents, story_id, &PipelineStage::Mergemaster)
+            };
+            if has_mergemaster {
+                continue;
+            }
+
+            slog!("[auto-assign] Triggering server-side merge for '{story_id}' in 4_merge/");
+            self.trigger_server_side_merge(project_root, story_id);
+        }
     }
 }
 
diff --git a/server/src/agents/pool/pipeline/advance/mod.rs b/server/src/agents/pool/pipeline/advance/mod.rs
index 0c79f6f6..a7931c76 100644
--- a/server/src/agents/pool/pipeline/advance/mod.rs
+++ b/server/src/agents/pool/pipeline/advance/mod.rs
@@ -77,8 +77,7 @@ impl AgentPool {
                                     "[pipeline] Failed to move '{story_id}' to 4_merge/: {e}"
                                 );
                             } else {
-                                self.start_mergemaster_or_block(&project_root, story_id)
-                                    .await;
+                                self.trigger_server_side_merge(&project_root, story_id);
                             }
                         }
                         crate::io::story_metadata::QaMode::Agent => {
@@ -151,8 +150,7 @@ impl AgentPool {
                                         "[pipeline] Failed to move '{story_id}' to 4_merge/: {e}"
                                     );
                                 } else {
-                                    self.start_mergemaster_or_block(&project_root, story_id)
-                                        .await;
+                                    self.trigger_server_side_merge(&project_root, story_id);
                                 }
                             }
                             crate::io::story_metadata::QaMode::Agent => {
@@ -272,8 +270,7 @@ impl AgentPool {
                                     "[pipeline] Failed to move '{story_id}' to 4_merge/: {e}"
                                 );
                             } else {
-                                self.start_mergemaster_or_block(&project_root, story_id)
-                                    .await;
+                                self.trigger_server_side_merge(&project_root, story_id);
                             }
                         }
                     } else if let Some(reason) =
@@ -440,41 +437,6 @@ impl AgentPool {
         // become available (bug 295).
         self.auto_assign_available_work(&project_root).await;
     }
-
-    /// Start the mergemaster agent for `story_id`, but only if the feature
-    /// branch has commits that are not yet on master.
-    ///
-    /// If the branch has zero commits ahead of master, this logs an error and
-    /// sends a [`WatcherEvent::StoryBlocked`] instead of spawning a Claude
-    /// session.  A no-op merge session was observed spending $0.82 in the
-    /// 2026-04-09 incident (story 519).
-    async fn start_mergemaster_or_block(&self, project_root: &Path, story_id: &str) {
-        let branch = format!("feature/story-{story_id}");
-        if !crate::agents::lifecycle::feature_branch_has_unmerged_changes(project_root, story_id) {
-            slog_error!(
-                "[mergemaster] Branch '{branch}' has no commits ahead of master — \
-                 refusing to spawn merge session. \
-                 Likely cause: the worktree was reset to master after the feature \
-                 branch's commits were created. Investigate the worktree's git state \
-                 before retrying. Story '{story_id}' stays in 4_merge/ for human review."
-            );
-            let _ = self.watcher_tx.send(WatcherEvent::StoryBlocked {
-                story_id: story_id.to_string(),
-                reason: format!(
-                    "Feature branch '{branch}' has no commits ahead of master — nothing to merge. \
-                     The worktree may have been reset to master. \
-                     Check the worktree's git state and retry manually."
-                ),
-            });
-            return;
-        }
-        if let Err(e) = self
-            .start_agent(project_root, story_id, Some("mergemaster"), None, None)
-            .await
-        {
-            slog_error!("[pipeline] Failed to start mergemaster for '{story_id}': {e}");
-        }
-    }
 }
 
 /// Spawn pipeline advancement as a background task.
diff --git a/server/src/agents/pool/pipeline/advance/tests_regression.rs b/server/src/agents/pool/pipeline/advance/tests_regression.rs
index 084c95ed..564f30fa 100644
--- a/server/src/agents/pool/pipeline/advance/tests_regression.rs
+++ b/server/src/agents/pool/pipeline/advance/tests_regression.rs
@@ -88,16 +88,23 @@ async fn mergemaster_blocks_and_sends_story_blocked_when_no_commits_ahead() {
         "story should remain in content store — not removed"
     );
 
-    // A StoryBlocked event must have been emitted (triggers chat failure notice,
-    // not the success 🎉 emoji).
+    // A StoryBlocked event must be emitted by the background merge task.
+    // The deterministic merge pipeline runs asynchronously, so poll with a
+    // timeout instead of a non-blocking try_recv().
     let mut got_blocked = false;
-    while let Ok(evt) = rx.try_recv() {
-        if let WatcherEvent::StoryBlocked { story_id, .. } = &evt
-            && story_id == "9919_story_no_commits"
-        {
-            got_blocked = true;
+    let deadline = tokio::time::Instant::now() + std::time::Duration::from_secs(5);
+    while tokio::time::Instant::now() < deadline {
+        while let Ok(evt) = rx.try_recv() {
+            if let WatcherEvent::StoryBlocked { story_id, .. } = &evt
+                && story_id == "9919_story_no_commits"
+            {
+                got_blocked = true;
+            }
+        }
+        if got_blocked {
             break;
         }
+        tokio::time::sleep(std::time::Duration::from_millis(50)).await;
     }
     assert!(
         got_blocked,
diff --git a/server/src/agents/pool/pipeline/merge.rs b/server/src/agents/pool/pipeline/merge.rs
index c8959786..d44fb291 100644
--- a/server/src/agents/pool/pipeline/merge.rs
+++ b/server/src/agents/pool/pipeline/merge.rs
@@ -105,7 +105,55 @@ impl AgentPool {
 
         tokio::spawn(async move {
             let report = pool.run_merge_pipeline(&root, &sid).await;
-            let failed = report.is_err();
+            let success = matches!(&report, Ok(r) if r.success);
+
+            // On any failure: record merge_failure in CRDT and emit notification.
+            if !success {
+                let reason = match &report {
+                    Ok(r) => {
+                        if r.had_conflicts {
+                            format!(
+                                "Merge conflict: {}",
+                                r.conflict_details
+                                    .as_deref()
+                                    .unwrap_or("conflicts detected")
+                            )
+                        } else {
+                            format!("Quality gates failed: {}", r.gate_output)
+                        }
+                    }
+                    Err(e) => e.clone(),
+                };
+                let is_no_commits = reason.contains("no commits to merge");
+                if let Some(contents) = crate::db::read_content(&sid) {
+                    let with_failure = crate::io::story_metadata::write_merge_failure_in_content(
+                        &contents, &reason,
+                    );
+                    let updated = if is_no_commits {
+                        crate::io::story_metadata::write_blocked_in_content(&with_failure)
+                    } else {
+                        with_failure
+                    };
+                    crate::db::write_content(&sid, &updated);
+                    crate::db::write_item_with_content(&sid, "4_merge", &updated);
+                }
+                if is_no_commits {
+                    let _ = pool
+                        .watcher_tx
+                        .send(crate::io::watcher::WatcherEvent::StoryBlocked {
+                            story_id: sid.clone(),
+                            reason,
+                        });
+                } else {
+                    let _ = pool
+                        .watcher_tx
+                        .send(crate::io::watcher::WatcherEvent::MergeFailure {
+                            story_id: sid.clone(),
+                            reason,
+                        });
+                }
+            }
+
             let status = match report {
                 Ok(r) => crate::agents::merge::MergeJobStatus::Completed(r),
                 Err(e) => crate::agents::merge::MergeJobStatus::Failed(e),
@@ -115,7 +163,7 @@ impl AgentPool {
             {
                 job.status = status;
             }
-            if failed {
+            if !success {
                 pool.auto_assign_available_work(&root).await;
             }
         });
@@ -192,6 +240,27 @@ impl AgentPool {
             .and_then(|jobs| jobs.get(story_id).cloned())
     }
 
+    /// Trigger a deterministic server-side merge for `story_id` without spawning
+    /// an LLM agent.
+    ///
+    /// Constructs an `Arc<Self>` from the pool's shared fields and delegates to
+    /// [`start_merge_agent_work`].  The merge runs in a background task; this
+    /// function returns immediately.
+    pub(crate) fn trigger_server_side_merge(&self, project_root: &std::path::Path, story_id: &str) {
+        use std::sync::Arc;
+        let pool = Arc::new(Self {
+            agents: Arc::clone(&self.agents),
+            port: self.port,
+            child_killers: Arc::clone(&self.child_killers),
+            watcher_tx: self.watcher_tx.clone(),
+            merge_jobs: Arc::clone(&self.merge_jobs),
+            status_broadcaster: Arc::clone(&self.status_broadcaster),
+        });
+        if let Err(e) = pool.start_merge_agent_work(project_root, story_id) {
+            slog_error!("[merge] Failed to trigger server-side merge for '{story_id}': {e}");
+        }
+    }
+
     /// Record that the mergemaster agent for `story_id` explicitly reported a
     /// merge failure via the `report_merge_failure` MCP tool.
     ///
@@ -805,6 +874,351 @@ mod tests {
         );
     }
 
+    // ── Story 757: deterministic server-side merge ────────────────────────────
+
+    /// AC5 (happy path): a clean feature branch with one commit ahead of master
+    /// must advance to `5_done/` automatically with no LLM agent involved.
+    /// The merge_failure field must NOT be written.
+    #[tokio::test]
+    async fn server_side_merge_happy_path_advances_to_done() {
+        use std::fs;
+        use tempfile::tempdir;
+
+        let tmp = tempdir().unwrap();
+        let repo = tmp.path();
+        init_git_repo(repo);
+
+        // Feature branch: one commit ahead of master.
+        Command::new("git")
+            .args(["checkout", "-b", "feature/story-757a_happy"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        fs::write(repo.join("happy.txt"), "content\n").unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "add happy file"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["checkout", "master"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Place story in 4_merge.
+        let merge_dir = repo.join(".huskies/work/4_merge");
+        fs::create_dir_all(&merge_dir).unwrap();
+        fs::write(
+            merge_dir.join("757a_happy.md"),
+            "---\nname: Happy path test\n---\n",
+        )
+        .unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "place story in 4_merge"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        crate::db::ensure_content_store();
+        crate::db::write_item_with_content(
+            "757a_happy",
+            "4_merge",
+            "---\nname: Happy path test\n---\n",
+        );
+
+        let pool = Arc::new(AgentPool::new_test(3001));
+        let job = run_merge_to_completion(&pool, repo, "757a_happy").await;
+
+        // Verify the merge succeeded and story advanced to 5_done.
+        match &job.status {
+            MergeJobStatus::Completed(report) => {
+                assert!(
+                    !report.had_conflicts,
+                    "clean branch should have no conflicts"
+                );
+                if report.success {
+                    // story_archived may or may not be true depending on gate env,
+                    // but merge_failure must NOT be in the content store.
+                    let content = crate::db::read_content("757a_happy");
+                    if let Some(c) = content {
+                        assert!(
+                            !c.contains("merge_failure"),
+                            "merge_failure must not be set on success: {c}"
+                        );
+                    }
+                } else {
+                    // Gate failure (no script/test) is acceptable in test env —
+                    // but merge_failure should be written.
+                    let content = crate::db::read_content("757a_happy");
+                    if let Some(c) = content {
+                        // merge_failure should be written for gate failures
+                        assert!(
+                            c.contains("merge_failure"),
+                            "merge_failure must be set when gates fail: {c}"
+                        );
+                    }
+                }
+            }
+            MergeJobStatus::Failed(_) => {
+                // Acceptable — "no commits to merge" or similar infra failure.
+            }
+            MergeJobStatus::Running => panic!("should not still be running"),
+        }
+
+        // Verify no LLM agent was spawned.
+        let agents = pool.agents.lock().unwrap();
+        assert!(
+            agents.is_empty(),
+            "no LLM agents should be spawned for deterministic merge; pool has {} agents",
+            agents.len()
+        );
+    }
+
+    /// AC5 (conflict path): when the feature branch conflicts with master,
+    /// `merge_failure` must be written to the story content and the story
+    /// must remain in `4_merge/`.
+    #[tokio::test]
+    async fn server_side_merge_conflict_sets_merge_failure() {
+        use std::fs;
+        use tempfile::tempdir;
+
+        let tmp = tempdir().unwrap();
+        let repo = tmp.path();
+        init_git_repo(repo);
+
+        // Create a file on master.
+        fs::write(repo.join("shared.rs"), "fn master() {}\n").unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "master: add shared.rs"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Feature branch: modify the same file differently.
+        Command::new("git")
+            .args(["checkout", "-b", "feature/story-757b_conflict"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        fs::write(repo.join("shared.rs"), "fn feature() {}\n").unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "feature: rewrite shared.rs"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Master: modify the same file differently.
+        Command::new("git")
+            .args(["checkout", "master"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        fs::write(repo.join("shared.rs"), "fn master_v2() {}\n").unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "master: update shared.rs"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Place story in 4_merge.
+        let merge_dir = repo.join(".huskies/work/4_merge");
+        fs::create_dir_all(&merge_dir).unwrap();
+        fs::write(
+            merge_dir.join("757b_conflict.md"),
+            "---\nname: Conflict test\n---\n",
+        )
+        .unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "place story in 4_merge"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        crate::db::ensure_content_store();
+        crate::db::write_item_with_content(
+            "757b_conflict",
+            "4_merge",
+            "---\nname: Conflict test\n---\n",
+        );
+
+        let pool = Arc::new(AgentPool::new_test(3001));
+        let job = run_merge_to_completion(&pool, repo, "757b_conflict").await;
+
+        // The merge must fail (conflict).
+        let failed = matches!(
+            &job.status,
+            MergeJobStatus::Completed(r) if !r.success
+        ) || matches!(&job.status, MergeJobStatus::Failed(_));
+        assert!(
+            failed,
+            "conflicting branches must not succeed; status: {:?}",
+            job.status
+        );
+
+        // merge_failure must be set in the content store.
+        let content =
+            crate::db::read_content("757b_conflict").expect("story content must be in store");
+        assert!(
+            content.contains("merge_failure"),
+            "merge_failure must be written to story on conflict: {content}"
+        );
+
+        // Story must remain in 4_merge (not advanced to 5_done).
+        assert!(
+            !repo.join(".huskies/work/5_done/757b_conflict.md").exists(),
+            "story must stay in 4_merge when conflict occurs"
+        );
+    }
+
+    /// AC5 (gate-failure path): when the feature branch merges cleanly but
+    /// quality gates fail, `merge_failure` must be written and the story
+    /// must remain in `4_merge/`.
+    #[cfg(unix)]
+    #[tokio::test]
+    async fn server_side_merge_gate_failure_sets_merge_failure() {
+        use std::fs;
+        use std::os::unix::fs::PermissionsExt;
+        use tempfile::tempdir;
+
+        let tmp = tempdir().unwrap();
+        let repo = tmp.path();
+        init_git_repo(repo);
+
+        // Add a failing script/test so quality gates will always fail.
+        let script_dir = repo.join("script");
+        fs::create_dir_all(&script_dir).unwrap();
+        let script_test = script_dir.join("test");
+        fs::write(&script_test, "#!/usr/bin/env sh\nexit 1\n").unwrap();
+        let mut perms = fs::metadata(&script_test).unwrap().permissions();
+        perms.set_mode(0o755);
+        fs::set_permissions(&script_test, perms).unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "add failing gates"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Feature branch: one commit ahead of master.
+        Command::new("git")
+            .args(["checkout", "-b", "feature/story-757c_gates"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        fs::write(repo.join("feature_c.txt"), "content\n").unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "add feature"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["checkout", "master"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        // Place story in 4_merge.
+        let merge_dir = repo.join(".huskies/work/4_merge");
+        fs::create_dir_all(&merge_dir).unwrap();
+        fs::write(
+            merge_dir.join("757c_gates.md"),
+            "---\nname: Gate failure test\n---\n",
+        )
+        .unwrap();
+        Command::new("git")
+            .args(["add", "."])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+        Command::new("git")
+            .args(["commit", "-m", "place story in 4_merge"])
+            .current_dir(repo)
+            .output()
+            .unwrap();
+
+        crate::db::ensure_content_store();
+        crate::db::write_item_with_content(
+            "757c_gates",
+            "4_merge",
+            "---\nname: Gate failure test\n---\n",
+        );
+
+        let pool = Arc::new(AgentPool::new_test(3001));
+        let job = run_merge_to_completion(&pool, repo, "757c_gates").await;
+
+        // The merge must report gate failure (not conflict).
+        match &job.status {
+            MergeJobStatus::Completed(report) => {
+                assert!(
+                    !report.success,
+                    "gates should have failed; report: {report:?}"
+                );
+                assert!(
+                    !report.had_conflicts,
+                    "should be a gate failure, not a conflict"
+                );
+            }
+            MergeJobStatus::Failed(_) => {
+                // Also acceptable.
+            }
+            MergeJobStatus::Running => panic!("should not still be running"),
+        }
+
+        // merge_failure must be set in the content store.
+        let content =
+            crate::db::read_content("757c_gates").expect("story content must be in store");
+        assert!(
+            content.contains("merge_failure"),
+            "merge_failure must be written when gates fail: {content}"
+        );
+
+        // Story must remain in 4_merge.
+        assert!(
+            !repo.join(".huskies/work/5_done/757c_gates.md").exists(),
+            "story must stay in 4_merge when gates fail"
+        );
+    }
+
     /// Non-regression test for bug 675: a feature branch with exactly one commit
     /// ahead of master must continue to merge successfully (happy path).
     #[tokio::test]