We report the observation of two-stage coalescence phenomena of water droplets, encapsulated in oil globules, toward a continuous water phase. The process is captured step by step by fast digital video microscopy. In the first stage, a transient water in water emulsion is formed: the oil enveloping the water droplet peels off, leaving the droplet immersed in the continuous water phase supported by a film of oil and surfactants. The retraction of the oil occurs in a time span of 1 ms. In the second stage, the film covering the water droplet wears and the drop breaks, releasing its contents to the continuous water phase. The second stage occurs in a time span of a few tens of milliseconds.