The error in the logs is:

Searching for GRUB installation directory ... found: /boot/grub
/etc/default/grub: line 1: is: command not found
run-parts: /etc/kernel/postinst.d/zz-update-grub exited with return code 127
Failed to process /etc/kernel/postinst.d at 
/var/lib/dpkg/info/linux-image-3.2.0-38-generic-pae.postinst line 1010.

This is not a bug in the grub package; rather, it indicates an incorrect
local change to /etc/default/grub which has broken this file.  You will
need to undo your local changes to this file, or correct them, in order
to be able to upgrade.

** Changed in: grub (Ubuntu)
       Status: New => Invalid

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https://bugs.launchpad.net/bugs/1127682

Title:
  package linux-image-3.2.0-38-generic-pae 3.2.0-38.60 failed to
  install/upgrade: subprocess installed post-installation script
  returned error exit status 2

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