My colleagues at work have been talking about an issue that I said is mixing right (Haqq) with false (Batil) while they believe that it's good deeds and charity. The other day there was an auction on the TV selling an actress' clothes who died for money and dedicated that money for a hospital of children cancer patients. I would like to know about the judgement of Islam on this event. I don't want to talk about the dead actress because she's dead but the word actress implies Haram. Is it ok to glorify someone and make celebration to sell his clothes or his stuff? What about the people's intention regarding paying these amounts of money?

Praise be to Allah, the Lord of the World; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

If such garments are only used in Haram activity or mostly in Haram, then participation in an auction for selling such garments is Haram. Such an action also constitutes a form of co-operation for vice and transgression.
Allah Says (interpretation of meaning): {…but do not help one another in sin and transgression. …}[5:2].
In addition, selling an actress' clothes urges other women to become professional actresses. Such an action will lead to a great corruption, which only Allah knows.
Then, spending money on such occasions is wrong. Allah, The Great and Almighty, will hold man responsible for earning and spending wealth.
Moreover, holding auctions on such trivial matters to raise money on behalf of the sick and so on is a form of delusion and deception. No body can come between the rich and their spending their money - as Sadaqa or in general - on the needy and the sick. Such a situation is not possible, and, is not a real reason to organize such auctions.
Thus, honoring someone by holding a ceremony on his/her behalf and selling his/her garments is not a known action among Muslims. Such an action is not proved in Sharia, customs or habits of Muslims, i.e. it is strange to Muslims and it is from their enemies. The Prophet (Sallallahu Alaihi wa Sallam) said: "Whoever imitates others (Non-Muslims) is not of us (Muslims); do not imitate Jews and Christians". [al-Tirmizi]
The Prophet (Sallallahu Alaihi wa Sallam) also said: "Whoever imitates some nation is considered one of them". [Ahmad in al-Musnad Book of Hadith]
I am greatly astonished! What kind of hearts have those people who pay such excessive amounts of money just for purchasing clothes and so on, since they see their Muslim brothers die due to hunger; other Muslims have neither a house nor shelter.
Apparently, such an action, i.e. purchasing clothes of so and so, is a form of ostentation. I wish they were proud of what is worthy of glory such as good deeds and beneficence. No doubt that such a work is Haram and a form of extravagance and foolishness.
Allah knows best.