She was the eldest daughter of Lydia Dueñas, a native of Northern Samar, and an American letter carrier, Kenneth Smith, who abandoned his family when the children were still young.

[3] To date, Paloma was known for films such as Brown Emanuelle (1981), The Victim (1982), Krus sa Bawat Punglo (1982), Virgin People (1983), Snake Sisters (1984), Naked Island (1984), Matukso kaya ang Anghel?

After appearing in a handful of films, Paloma was involved in a highly publicized scandal when she accused comedians Vic Sotto, Joey de Leon, Deo Cacho and Ricardo "Richie D'Horsie" Reyes of rape.

Although the three suspects initially denied Paloma's accusations, they later issued a public apology, on their knees on live TV, and in an article published by the People's Journal on October 13, 1982, saying: We hope that you will not allow the error we have committed against you to stand as a stumbling block to that future which we all look forward to.

A diary, citing monetary problems and anxieties over her relationship with her mother and her boyfriend and was found in her bedroom, although the authenticity of the journal entries have been questioned, especially by her manager Babette "Babe" Corcuerra, who claims she was actually earning well.

[8][9] Despite the suspects' earlier apology, Tito Sotto has maintained his position against any involvement in the whitewashing of the rape case and alleges that the scandal was a gimmick by Paloma's party for publicity.

[14] In a 2024 interview by Julius Babao to fellow Softdrink Beauty Coca Nicolas, she denied the allegations and maintained that the TVJ rape scandal was merely a publicity stunt orchestrated by their manager, Rey dela Cruz, and that no such sexual assault actually took place.