SMT X NON ADHERENCE TO ATC CLRNC ALT DEV HAD LTSS FROM ACFT Y.

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SMT X; A BE90; DEPARTED EDE VFR; REQUESTED IFR CLRNC TO FREDERICK; MD. A FLT PLAN WAS ON FILE; SO I ACTIVATED IT AND RADAR IDENTED X WITH TFC AT 5000 FT; ACFT Y. I ASKED X TO MAINTAIN 4000 FT PRIOR TO CLRNC; AND CALLED TFC. WHEN X REPLIED AFFIRMATIVE TO THE ALT; I THEN CLRED X 'AS FILED; MAINTAIN 4000 FT.' X ROGERED CLRNC; BUT SHORTLY THEREAFTER I NOTICED THE CONFLICT ALERT ACTIVATE AND NOTICED CLBING THROUGH 4500 FT. I QUERIED THE PLT AS TO WHETHER HE WAS LEVEL AT 4000 FT AND HE REPLIED 'WE'RE BRINGING HER BACK DOWN.' I BELIEVE THE PLT; WHEN HEARING 'CLRED AS FILED;' ALSO HEARD HIS REQUESTED ALT (11000 FT); EVEN THOUGH 4000 FT WAS ISSUED. SUPPLEMENTAL INFO FROM ACN 284604: SMA X WAS ASSIGNED AN ALT OF 4000 FT. AT THAT POINT THE AIRPLANE WAS LEVELED OFF AND THE AUTOPLT WAS PLACED IN THE ALT HOLD FUNCTION. THE EMER RED LIGHT; NOTIFYING ME THAT THE HYD FLUID WAS EMPTY; CAME ON. IN TURN; I WENT TO CONSULT THE EMER CHKLIST AND PLT HANDBOOK TO FIND OUT THE PROC IN HANDLING THIS EMER. AT THIS POINT; ATC NOTIFIED ME THAT I HAD BROKEN MY ALT. IN ALL THAT WAS HAPPENING; I NOTIFIED ATC THAT I WAS BRINGING THE AIRPLANE BACK TO 4000 FT. AT THIS POINT; I HAD SO MUCH GOING ON THAT I WAS TRYING TO FLY THE ACFT; HOLD THE ALT AND DETERMINE WHAT TO DO WITH THE EMER LIGHT FOR THE HYD FLUID. PLEASE UNDERSTAND; I HAD NO INTENTION OF BREAKING MY ALT BUT I DID NOT KNOW THE ALT HOLD WAS NOT ON. IN TURN; I PROCEEDED TO FAMILIARIZE MYSELF WITH THE PROC FOR LNDG AND THEN RECEIVED ANOTHER CALL FROM ATC NOTIFYING ME TO CALL QUALITY ASSURANCE; WHICH I DID WHEN I LANDED. FOR SOME UNKNOWN REASON; NOBODY ANSWERED THAT PHONE NUMBER. AT THAT POINT; I CALLED FBO AND NOTIFIED THEM THAT UPON LNDG AT FREDERICKSBURG; VA; THAT THE L WHEEL STRUT WAS SATURATED IN RED HYD OIL. THE DECISION AT THAT POINT WAS TO FLY THE ACFT DIRECTLY FROM THERE TO NORFOLK AND UNDER NO CIRCUMSTANCES WAS I TO RAISE THE GEAR BACK UP.