Complex sentence: Bilbo returns to Bag End to find his belongings being auctioned off because he was presumed dead, and uses the contract presented to him by Thorin's company before the expedition which still bears his signature to prove his identity.
Split into simpler sentences: Bilbo returns to Bag End to find his belongings being auctioned off because he was presumed dead. He uses the contract presented to him by Thorin's company to prove his identity.