Transfer case encode motor short to ground or open

I am attaching the wiring diagram. A is your 5 volt reference so that is correct. However, B is you encoder signal return and it should run through a resistor in the encoder so I suspect the encoder has failed. I have not seen the voltage be that high but that is the only thing at this point that would make sense. I would suggest unplugging the encoder and the shift module and check for a short on the wire and if none is found then it is the encoder.

Here is a guide that will help with this:

https://www.2carpros.com/articles/how-to-check-wiring

I also attached below the process to replace the encoder if this proves out. Thanks