P50 controller described a TCAS RA event between an IFR CE560 and a VFR PA28; apparently caused by a malfunctioning Mode C in the PA28; traffic was issued and sighted by the PA28 prior to the event.

Narrative

I had a PA28; VFR; Southbound from Biltmore airport on the East Transition; at 3;500. Additional traffic was a C560 Northbound on heading 350; level 4;000. When the two were still about 4 miles apart I saw the PA28's altitude fluctuating between non reporting; 3;500 and 3;700. I verified they were level 3;500 and they confirmed this; I advised them to reset transponder. I exchanged traffic between the two aircraft and the PA28 had the CE560 in sight when they were approximately 2 miles apart. The PA28's transponder appeared to be functioning properly after the reset for a sweep or two; but then when the two targets were just about to merge I got the resolution call from the CE560 indicating they were climbing. I called traffic again; advised the Citation the Cherokee had him in sight and was in fact at 3;500. I could have done a better job explaining it phraseology wise; instead of saying the Cherokee's Mode C was errant; I said something to the effect of; 'I do see the Cherokee indicating 3;700 but have verified he's level 3;500. 'Thankfully there was no traffic in the 4;500 altitude for the transition as the Citation climbed to 4;300. I advised the PA28 to have their transponder checked when they landed.