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SCVMM 2008 R2 SP1 to VMM 2012 upgrade fail- Database exception

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I am upgrading from SCVMM 2008 R2 SP1 to SCVMM 2012. DB is running on SQL 2008 R2.

This is an Inplace upgrade of SCVMM.

The account that we are connecting SQL DB and installing  has SA and DBO rights. SA permission we are using until the install/upgrade is complete.

Below is the error i see from the setup log. 

05:59:42:ProcessInstalls: Install Item VMM management server was successful.  We will launch the post process delegate.

06:00:26:VMMPostinstallProcessor threw an exception: Threw Exception.Type: Microsoft.VirtualManager.Setup.Exceptions.DatabaseConfigurationException, Exception.Message: The Virtual Machine Manager database was not created.

The Virtual Machine Manager database was not created. Delete VMMHQSEGDB03.mdf and VMMHQSEGDB03_log.ldf if they exist at D:\Mnt\Data\MSSQL10_50.DEV153\MSSQL\DATA\ or use a unique name for the database. Also, verify that disk quota management is not enabled for the drive where the database is being created. Then run Setup again.

06:00:26:StackTrace:   at Microsoft.VirtualManager.Setup.DBConfigurator.ExecuteScript(SqlContext ctx, String fileName)

   at Microsoft.VirtualManager.Setup.DBConfigurator.UpgradeDatabaseTables()

   at Microsoft.VirtualManager.Setup.VirtualMachineManagerHelpers.CreateDB()

   at Microsoft.VirtualManager.Setup.InstallItemCustomDelegates.PangaeaServerPostinstallProcessor()

06:00:26:ProcessInstalls: Running the PostProcessDelegate returned false.

06:00:26:ProcessInstalls: Running the PostProcessDelegate for PangaeaServer failed.... This is a fatal item.  Setting rollback.

06:00:26:SetProgressScreen: FinishMinorStep.

06:00:26:ProcessInstalls: Rollback is set and we are not doing an uninstall so we will stop processing installs

06:00:26:****************************************************************

06:00:26:****Starting*RollBack*******************************************

06:00:26:****************************************************************



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