We had a very reasonable conversation and ultimately moved out without accepting payment from us.Sometimes a gentle approach will net you better results.

Is the crawlspace treated for moisture (usually pea gravel and plastic) Is there free airflow between the crawl and the basement? 

It could be efflorescence on the grout from too much moisture. 

Wood doesn't really ever fail unless it's been compromised by cutting or moisture.

Hi @Rich Riesmeyer,Another solution would be to re-install drywall, but instead of sitting the first row of sheetrock panels directly on the floor level, lift them up 6-8 inches above floor level to help deter moisture from wicking up from the floor, and install a PVC 1x10 or 1x12 as a baseboard trim at the base of the walls directly on top of the garage floor.

I've seen it in a few multi-family complexes and it is the WORST.Once all the drywall is gone and the water problems are solved, you have to eliminate the leftover moisture.  

I just recently joined Bigger Pockets and this is my first post... so be gentle!

This area is prime to form heart rot as any moisture will want to collect there.Most states have a forestry commission or a university extension service that will have an urban forester on staff.

I've seen this with moisture damage to the wood. 

The others were more gentle if that makes sense.Supposedly this was a 4.7 or something.