The drywall may be on furring strips fastened to the brick.

Often pieces as small as 1x2.

They should be spaced the same as studs (no more than 24 inches, with 16 inches prefered) but someome may have saved a few $ by placing them every 4 feet (and not to the bottom or top of the drywall sheet).

You need to figure out how water is getting inside the wall.

Where the gargage roof joins the house is a likely spot for the leak.

Drywall is not expensive, nor are the furring strips (1x4s are easier to hit when fastening the drywall).

I would seriously consider stripping the drywall, fixing the leak (wait till you have had a few rainstorms before putting up new - any leaks will be easy to see without the drywall), and then putting in some new furring strips and replacing any old ones that are damaged or short, and hanging new drywall.

If the brick is reasonably flat flat not much shimming of the furring strips should be required.

Thanks Brickeyee. You feel that it is probably a water leak then?

the problem with converting garages into living space
is that in many cases there is no vapor barrier under the slab. nowdays..vapor barrier (visqueen) covers entire slab
but it wasn't always that way.
moisture wicks in to the framing members and in our climate the walls dry to the interior.
when you place an interior vapor barrier (some wallpapers
& paints are vapor barriers) the moisture can not excape into the
living space to dry out. mold grows on the back of the
wallpaper.

also there may be moisture comming through the brick
as bricks are porus.
when building a house once the house is framed in an exterior wrap is used to shed water..then the bricks go on
top. if the garage was not build in this method then moisture is entering the walls. a bandaid fix (meaning you would have to do this ever few years)is to water seal the brick. (not my fix btw...)

once you determine where the moisture is comming from..
walls or floor.. then you need to stop the moisture.
change out sheetrock and use materials that will not form
an interior vapor barrier on the walls.
adding a standalone dehumidifier will help to dry out the room/walls and lower Relative Humidity.
Keeping 50% RH will keep it dry enough that mold won't grow
(as long as you have eliminated moisture & the food source
in this case it is the paper on the back of the sheetrock that feeds the mold growth.
best of luck

Should have added this in. I looked in the attic and saw an area above that wall and there is a small piece of repair on the area maybe around 12 inches long. Original material is that pressed board and this was a piece of regular plywood. I wonder if there used to be a leak there and it was fixed. I have lived here 8 years. so I wonder if it is an old leak that is gone now. See photo below and click for a larger view.
Should I still replace the drywall do you think or just use Kilz or something and repaint it??

Thanks again..

{{!gwi}}

At the very least you should thoroughly investigate were the moisture may have come from.

While concrete does wick moisture very well (enough that any wood attached withing 18 inches of grade is required to be pressure treated).

Is there ANY damage higher up on the wall, or is it strictly confined to the bottom?

If the drywall touches the concrete the problem could well be wicking through the concrete and into the drywall (in basements the drywall is always held off the floor by a small amount, even a half inch helps).

Thanks for the replies. It looks like the damage is only near the bottom but i did notice a rusty looking nail about 2 feet up. I should mention that after reading what energy_rater_la said, it made me think that maybe it was coming up through the contrete floor. I looked outside where that area is and I see that there is no gutter system and it is a galley on the roof (2 areas pitched to form a v?) so when it rains TONS of water comes off of that area as i have a huge roof because my attic is walk in. So I am wondering if the water in the yard after a heavy rain is maybe causing it. Storm after storm, year after year of water coming up through the concrete?.?
It rains a lot here. When it is raining really hard that area on the roof looks like someone opened a fire hydrant, that's how much water comes off and hits the ground.

Thanks again for replies, I really appreicate them.

Figure out where there is a leak if there is . After good rain check a day or 2 later to see if it feels wet & clammy. It would be best to remove the drywall & have a good look at the back & what condition the strips holding it in place are, may need to improve the backing before you put new drywall up. After drywall is in place it must be primered before you wallpaper it & I even give it a coat of flat paint. Then you wouldn't have as much chance of mold forming.I don't know if they have mildew resistant wallpaper but the wheat paste does encourage mold. Can you put some gutter to a better place where the water can go harmlessly? Maybe you should look into other solutions for that wall such as paneling, pegboard painted & used for "art" wall, outdoor cedar, etc. Mold is not a good thing to live with & can make your family very sick. Hope you get to bottom of it!!

Thank you. Yes, I am going to put a gutter up, either way it cannot be good to have that much water near the foundation.
I have never done drywall before, so I may just cut a hole in it and take a look to see what it looks like in there. It actually rained hard last night and it seem all good and dry. I have a humidty tester and it is around 55-60% in the room near that wall.
Also, I cleaned the mold on the wall and it appers to have been on the surface only of the drywall. So maybe I will luck out there.

I have a issue with a roof leak the association just never could fix. Now my garage ceiling has mold and it really smells bad. I don't know what to do. After years of battling with association they now make us responsible for our own roofs.
My issue is, what do I do? I know roof leak needs to be fixed. Should I have someone out to cut out ceiling portion and put new ceiling back up?? Money is really tight. Homeowner's association is no help.
Donna

you should really start a new thread as you'll get
more input Donna.

first understand that for mold to grow it needs
two things, moisture & a food source.
eliminate the moisture source, once
you find out what it is. I'd start at the roof.

open the ceiling, remediate..maybe as simple
as letting things dry out once moisture is stopped,
maybe materials need to be replaced.
you won't know until you can see it.

it takes time for mold to grow, it doesn't happen
overnight, so maybe hoa will have to cover it if it
predates your repair of roof. inside the home it
can take 5 years...but in a garage? don't know.

you'll want someone experienced
in mold remediation to handle materials properly & safely
as they are removed. and be able to prove it if necessary
to hoa. that may be expensive.

I do a some of mold remediation, respirators, sealing off
room, double bagging materials etc.
reason for doing the work is that too many people treat
mold like a gold mine & scare homeowners with toxic mold
stories. realistically, only 2 types are toxic, and every
house has mold...somewhere.
so try to steer clear of those folks.

so, if you were to diy, fix leak, open ceiling.
once you open a spot up...you can look to see
how far the damage extends. cut out sheetrock
to that point & look again, cut so that you can easily replace it with new sheet/piece.
remove insulation, if any & look at 2x's to see if mold
has grown on them.
I use tsp (tri sodium phosphate or something like that)
& scrub with a brush. let dry, rinse, scrub again.
let it all dry for a few days. put a fan on it.
check moisture level of wood & at 30% you can
close it up again. tape & float sheetrock.
sometimes I'll kiltz or bullseye/zinner the framing
members when the area is opened.

hope your hoa will do what is right here for you.

best of luck