The transfer case hydraulicly locks the front diveshaft shaft depending on traction conditions. When the seal for this mechanism goes bad the case fills with hydraulic fluid and eventually vents it out of the overflow. The solution is to replace the transfer case which is not a cheap endeavor. Repair usually isn't feasible as the aluminum in the area where the seal fails tends to wallow out. The new cases are upgraded and have a steel sleeve to prevent this. If you go for a used case make sure it is a new style part. Either way, it will be worth the cash to repair it. The 4-matic wagons are great driving cars and with lighweight wheels have amazing grip, not to mention they are real workhorses when it comes to payload. One of the main reasons I'm in the process of buying another after my last one was hit and runned.