The phrase "Kill them All and let God sort them out " is from the 13th century and was in reference to the Cathars" First the Cathars weathered a particularly vicious crusade: 20,000 people were slaughtered in the city of Beziers alone after the monk in charge of the assault, when asked how to distinguish heretics from Catholics, replied, "Kill them all, God will know his own." http://www.christianitytoday.com

have you seen in:
http://military-quotes.com/misc%20quotes.htm

I have read that as much as 100,000 were killed in the city of Beziers alone.
And that the phrase was used after the city was taken.
They had captured over 450 people, where most of them claimed to be catholics.
The phrase: "Neca eos omnes. Deus suos agnoset", or "Kill them all. God will know His own.", was used there.
It did not matter if they killed good people, because if one led a godly life, God would know of it, and the reward would be eternal paradise anyway.