diff --git a/server/src/com/cloud/storage/StorageManager.java b/server/src/com/cloud/storage/StorageManager.java
index 1a18fe7c377..b7475e58b72 100755
--- a/server/src/com/cloud/storage/StorageManager.java
+++ b/server/src/com/cloud/storage/StorageManager.java
@@ -281,4 +281,6 @@ public interface StorageManager extends Manager {
     //void release(VirtualMachineProfile<? extends VirtualMachine> vm);
 
 	void release(VirtualMachineProfile<? extends VMInstanceVO> profile);
+
+	void cleanupVolumes(Long vmId);
 }
diff --git a/server/src/com/cloud/storage/StorageManagerImpl.java b/server/src/com/cloud/storage/StorageManagerImpl.java
index 4e70c6ae55d..9f4b9de9bb1 100755
--- a/server/src/com/cloud/storage/StorageManagerImpl.java
+++ b/server/src/com/cloud/storage/StorageManagerImpl.java
@@ -2878,10 +2878,13 @@ public class StorageManagerImpl implements StorageManager, StorageService, Manag
     
     @Override
     public void release(VirtualMachineProfile<? extends VMInstanceVO> profile) {
-    	//Clean up volumes based on the profile's instance id
-    	List<VolumeVO> volumesForProfile = _volsDao.findByInstance(profile.getId());
-    	
-    	for(VolumeVO vol : volumesForProfile){
+    	//add code here
+    }
+    
+    @Override
+    public void cleanupVolumes(Long vmId){
+        List<VolumeVO> volumesForVm = _volsDao.findByInstance(vmId);    	
+    	for(VolumeVO vol : volumesForVm){
     		destroyVolume(vol);
     	}
     }
diff --git a/server/src/com/cloud/vm/UserVmManagerImpl.java b/server/src/com/cloud/vm/UserVmManagerImpl.java
index 0d9bd056ddd..f00bc38d255 100755
--- a/server/src/com/cloud/vm/UserVmManagerImpl.java
+++ b/server/src/com/cloud/vm/UserVmManagerImpl.java
@@ -1979,7 +1979,7 @@ public class UserVmManagerImpl implements UserVmManager, UserVmService, Manager
 	private void updateVmStateForFailedVmCreation(Long vmId) {
 		UserVmVO vm = _vmDao.findById(vmId);
 		if(vm != null){
-			if(vm.getState().equals(State.Creating)){
+			if(vm.getState().equals(State.Stopped)){
 				_itMgr.stateTransitTo(vm, VirtualMachine.Event.OperationFailed, null);
 			}
 		}
@@ -2519,12 +2519,9 @@ public class UserVmManagerImpl implements UserVmManager, UserVmService, Manager
         UserVmVO vm = new UserVmVO(id, instanceName, cmd.getDisplayName(),
                                    template.getId(), template.getGuestOSId(), offering.getOfferHA(), domainId, owner.getId(), offering.getId(), userData, hostName);
 
-        try{
-	        if (_itMgr.allocate(vm, template, offering, rootDiskOffering, dataDiskOfferings, networks, null, plan, cmd.getHypervisor(), owner) == null) {
-	            return null;
-	        }
-        }finally{
-        	updateVmStateForFailedVmCreation(id);
+
+        if (_itMgr.allocate(vm, template, offering, rootDiskOffering, dataDiskOfferings, networks, null, plan, cmd.getHypervisor(), owner) == null) {
+            return null;
         }
         
         if (s_logger.isDebugEnabled()) {
@@ -2556,8 +2553,12 @@ public class UserVmManagerImpl implements UserVmManager, UserVmService, Manager
 	    
 	    AccountVO owner = _accountDao.findById(vm.getAccountId());
 	    
-	    vm = _itMgr.start(vm, null, caller, owner, cmd.getHypervisor());
-	    vm.setPassword(password);
+	    try {
+			vm = _itMgr.start(vm, null, caller, owner, cmd.getHypervisor());
+		} finally {
+			updateVmStateForFailedVmCreation(vm.getId());
+		}
+		vm.setPassword(password);
 	    return vm;
 	}
 	
diff --git a/server/src/com/cloud/vm/VirtualMachineManagerImpl.java b/server/src/com/cloud/vm/VirtualMachineManagerImpl.java
index 448eab4e0d1..559ad108b10 100644
--- a/server/src/com/cloud/vm/VirtualMachineManagerImpl.java
+++ b/server/src/com/cloud/vm/VirtualMachineManagerImpl.java
@@ -67,6 +67,7 @@ import com.cloud.storage.DiskOfferingVO;
 import com.cloud.storage.Storage.ImageFormat;
 import com.cloud.storage.StorageManager;
 import com.cloud.storage.VMTemplateVO;
+import com.cloud.storage.VolumeVO;
 import com.cloud.storage.Volume.VolumeType;
 import com.cloud.storage.dao.VMTemplateDao;
 import com.cloud.user.Account;
@@ -257,6 +258,9 @@ public class VirtualMachineManagerImpl implements VirtualMachineManager, Cluster
             return false;
         }
         
+    	//Clean up volumes based on the vm's instance id
+    	_storageMgr.cleanupVolumes(vm.getId());
+
         VirtualMachineGuru<T> guru = getVmGuru(vm);
         vm = guru.findById(vm.getId());
 
@@ -569,6 +573,7 @@ public class VirtualMachineManagerImpl implements VirtualMachineManager, Cluster
     	_stateMachine.addTransition(State.Stopped, VirtualMachine.Event.DestroyRequested, State.Destroyed);
     	_stateMachine.addTransition(State.Stopped, VirtualMachine.Event.StopRequested, State.Stopped);
     	_stateMachine.addTransition(State.Stopped, VirtualMachine.Event.AgentReportStopped, State.Stopped);
+    	_stateMachine.addTransition(State.Stopped, VirtualMachine.Event.OperationFailed, State.Error);
     	_stateMachine.addTransition(State.Starting, VirtualMachine.Event.OperationRetry, State.Starting);
     	_stateMachine.addTransition(State.Starting, VirtualMachine.Event.OperationSucceeded, State.Running);
     	_stateMachine.addTransition(State.Starting, VirtualMachine.Event.OperationFailed, State.Stopped);