Feedback Wanted on Hypothetical Auction Shipping Damage Scenario

[fuzzybub]

I have a hypothetical situation involving an auction house purchase that I wanted to present, one that has probably been encountered in the past by others. I would like to see if I can get some constructive feedback on it.
Here it is:

A person wins an item through an auction house, pays for it in full including
the buyer’s premium. They receive the item and after opening the package find that it is damaged. They file a claim with the shipping company which is approved. Due to the nature of the filing process, the approved claim check has to pass through the auction house before getting to the customer who filed. The person is informed by the auction house that to receive the claim(money), the damaged item has to be returned to the auction house.
From a legal standpoint, does the customer have to return the item to the
auction house in order to receive the claim check? (Does the auction house have a legal right to withhold the claim check until the damaged item is
returned).The person has paid for it in full(including the handling, shipping & INSURANCE) and is the legal owner of it(and
has it in their possession). The auction house is not out of anything
financially. They have received full payment for the item from the customer(Which includes their buyer's premium fee) and any money being
returned to the customer is via the shipping company approved claim paid by the shipping company as a result of insurance paid for by the customer.


Any insight on this hypothetical situation would be greatly appreciated.