SQL Server error "Implicit conversion of because the collation of the value is unresolved due to a collation conflict."

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I getting this error while developing stored procedure

Implicit conversion of varchar value to varchar cannot be performed because the collation of the value is unresolved due to a collation conflict.

statement is like this

Select City COLLATE DATABASE_DEFAULT AS Place, State, Country FROM DEPT1
UNION ALL
Select '' AS Place, 'Arizona' As State, Country FROM DEPT2

but If If do this it also give same error

 Select City COLLATE DATABASE_DEFAULT AS Place, State, Country FROM DEPT1
 UNION ALL
 Select '' COLLATE DATABASE_DEFAULT AS Place, 'Arizona' As State, Country FROM DEPT2

Actually this code is written by some one else and am just editing the code, do not know why he added COLLATE DATABASE_DEFAULT but If I remove it also gives the same error

Implicit conversion of varchar value to varchar cannot be performed because the collation of the value is unresolved due to a collation conflict.

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