--- a/src/modules/actions/directory.py	Tue Mar 10 15:29:46 2015 -0700
+++ b/src/modules/actions/directory.py	Thu Mar 12 11:17:36 2015 -0700
@@ -71,12 +71,12 @@
         def directory_references(self):
                 return [os.path.normpath(self.attrs["path"])]
 
-        def __create_directory(self, pkgplan, path, mode):
+        def __create_directory(self, pkgplan, path, mode, **kwargs):
                 """Create a directory."""
 
                 try:
                         self.makedirs(path, mode=mode,
-                            fmri=pkgplan.destination_fmri)
+                            fmri=pkgplan.destination_fmri, **kwargs)
                 except OSError as e:
                         if e.filename != path:
                                 # makedirs failed for some component
@@ -201,7 +201,10 @@
                         except OSError as e:
                                 if e.errno != errno.EPERM and \
                                     e.errno != errno.ENOSYS:
-                                        raise
+                                        # Assume chown failed due to a
+                                        # recoverable error.
+                                        self.__create_directory(pkgplan, path,
+                                            mode, uid=owner, gid=group)
 
         def verify(self, img, **args):
                 """Returns a tuple of lists of the form (errors, warnings,
@@ -231,7 +234,7 @@
                         elif e.errno == errno.EBUSY and os.path.ismount(path):
                                 # User has replaced directory with mountpoint,
                                 # or a package has been poorly implemented.
-				if not self.attrs.get("implicit"):
+                                if not self.attrs.get("implicit"):
                                         err_txt = _("Unable to remove {0}; it is "
                                             "in use as a mountpoint. To "
                                             "continue, please unmount the "
@@ -245,7 +248,7 @@
                                 # os.path.ismount() is broken for lofs
                                 # filesystems, so give a more generic
                                 # error.
-				if not self.attrs.get("implicit"):
+                                if not self.attrs.get("implicit"):
                                         err_txt = _("Unable to remove {0}; it "
                                             "is in use by the system, another "
                                             "process, or as a "

--- a/src/tests/cli/t_pkg_install.py	Tue Mar 10 15:29:46 2015 -0700
+++ b/src/tests/cli/t_pkg_install.py	Thu Mar 12 11:17:36 2015 -0700
@@ -2702,6 +2702,13 @@
             close
         """
 
+        dumdir30 = """
+            open [email protected]
+            add dir path=etc mode=0700 owner=bin group=bin
+            add file tmp/amber1 mode=0400 owner=root group=bin path=etc/amber1
+            close
+        """
+
         misc_files1 = [
             "tmp/amber1", "tmp/amber2", "tmp/bronzeA1",  "tmp/bronzeA2",
             "tmp/bronze1", "tmp/bronze2",
@@ -3086,7 +3093,8 @@
                 """Test manually removed directory and files will be restored
                  during update, if mode are different."""
 
-                self.pkgsend_bulk(self.rurl, (self.dumdir10, self.dumdir20))
+                self.pkgsend_bulk(self.rurl, (self.dumdir10, self.dumdir20,
+                    self.dumdir30))
                 self.image_create(self.rurl)
 
                 self.pkg("install -vvv [email protected]")
@@ -3096,6 +3104,10 @@
 
                 self.pkg("update -vvv [email protected]")
                 self.pkg("verify -v")
+                shutil.rmtree(dirpath)
+
+                self.pkg("update -vvv [email protected]")
+                self.pkg("verify -v")
 
         def test_upgrade_liveroot(self):
                 """Test to make sure upgrade of package fails if on live root