I found out how to solve it.
Just set $("form").validate({ignore:[], ...});
where "form" should be your selector and ... is your options.
The reason for the error is because jquery validation skips validating inputs set to display:none. Placeholder plugin sets password elements to display:none while not focused that is why it passed the validation. If you set ignore to [] it will override the default behavior of jquery validation which is not to validate display:none elements.